Tax deduction on house rent – Section 80GG

Tax deduction on house rent paid for furnished or unfurnished accommodation can be claimed if an individual is not getting House Rent Allowance or HRA is not a part of his or her salary.

This tax deduction is available to taxpayers under section 80GG of the Income tax act, 1961.

If you are getting House rent allowance or HRA from your employer, instead of taking tax deductions under section 80GG, you have to go for section 10 (13A) to claim exemption from HRA received.

In this article we will be discussing how to claim tax deduction on house rent under section 80GG.

To claim tax deduction on house rent under section 80GG, you are required to satisfy following conditions;

• You are either a self-employed person or salaried individual not getting House Rent Allowance (HRA) from the employer.
• You have not received HRA at any time during the financial year for which this tax deduction claim is made.
• Taxpayer or spouse, his/her minor child or HUF does not own any residential accommodation at the place where the taxpayer currently reside or perform duties or carry on business or profession.
• Taxpayer has not claimed tax deduction for residential property at any place as a self-occupied property.

Amount of tax deduction on house rent under Section 80GG

If the conditions of section 80GG satisfied, then lowest of the following will be considered as tax deduction on house rent under section 80GG of income tax act 1961:-

• Rs. 5,000 per month;
• Actual house rent paid in excess of 10% of adjusted total income;
• 25% of adjusted total income

Adjusted total income for the purpose of section 80GG means the Gross total income minus long term capital gain if any minus short term capital gain minus all permissible deduction under section 80C to 80U except deduction under section 80GG minus income referred to in section 115A, 115AB, 115AC or 115AD.

Calculation of adjusted total income

In case of tax exemption under section 10(13A), HRA exemption is to be calculated based on the city of living. Like in case of metro cities, you are eligible for a higher tax exemption in comparison of non-metro cities.

But, tax deduction under section 80GG is not based on the city of living. Tax deduction on house rent paid under section 80GG has to be claimed irrespective of your city of living.

Submit Form 10BA to claim tax benefits U/S 80GG

To claim tax deduction under section 80GG, you must file a declaration in form no 10BA by confirming that you have paid house rent and fulfilled all the conditions as specified under section 80GG to claim tax deduction.

To file form 10BA, you are required to log-in into your income tax account and then under prepare and submit online form you have the option to prepare and file form 10BA. You can prepare the form online and file it. You are required to provide following details while filing form 10BA;

• Full address of the premises
• Amount paid as rent
• Name and address of the landlord

Example showing how to calculate tax deduction u/s 80GG for payment of house rent

Mr A’s total income for the financial year 2023-2024 (assessment year 2024-25) after all deductions is Rs 4,00,000 and he pays annual rent of Rs 2,50,000. In this case, tax deduction under section 80GG will be the least of following;

• Rs. 60,000 (i.e. Rs. 5,000*12)
• Rs. 2,10,000 (Rs. 2,50,000-10% of Rs. 4,00,000)
• Rs. 1,00,000 (25% of Rs. 4,00,000)

Mr A can claim tax deduction of Rs 60,000 under section 80GG being the lowest of three for the financial year 2023-24 (assessment year 2024-25). Same provision is applicable to financial year 2022-23 (assessment year 2023-24).

Note: If an individual opts for the alternative tax regime as per the provisions of section 115BAC, then tax deduction under section 80GG is not available. This provision is applicable from the Financial year 2020-21 (Assessment year 2021-22). This means, for the financial year 2023-24 (assessment year 2024-25), if you have opted for alternative tax regime U/s 11BAC, then you can not claim tax deduction under section 80GG.

Also Read: 5 Common tax saving mistakes to avoid