House rent can be a huge part of one’s regular expenditure. For most salaried people, the HRA (house rent allowance) paid by the employer helps in meeting the rents. The Income Tax (IT) Act has provisions to claim tax deductions for the HRA component in their salary. Section 80GG was designed to ensure people who do not receive HRA, such as self-employed professionals, and also get tax deductions if they pay house rent.
Section 80GG: Main features
Section 80GG is a provision in the IT Act that states that an individual or a Hindu Undivided Family (HUF) can claim a tax deduction for the house rent. This tax deduction is applied to your gross income so that you arrive at a lower net taxable income on which income tax is levied.
The house rent can be for either a furnished house or an unfurnished one. The
house on which the tax deduction is claimed should only be used for residential purposes and not for any commercial purpose.
Eligibility for the Section 80GG
To claim deduction under Section 80GG:
· You either have to be an individual or a Hindu Undivided Family (HUF). A company or an enterprise can’t claim tax deductions under Section 80GG for its rental expenses.
– You must be self-employed or a salaried individual without HRA.
Salaried individuals need to furnish details like the pay-slip and offer letter to prove that you don’t receive or are not entitled to HRA from your employer to make a claim under Section 80GG.
· You must be living as a tenant in the rented property on which tax deduction is claimed.
· You should not be owning any house declared as self-occupied property.
· You or your HUF should not own any residential property at your current place of residence.
Documents needed to claim tax deduction under Section 80GG
– If your rent is more than Rs. 1 lakh annually, then you need to provide the PAN details of your landlord. The PAN details are used by the IT department to validate your claim of staying as a tenant in a rented house.
– Your identity proof
·Copy of PAN card
– Proof of address at the rented residential property
·Proof of rent tenure
·Proof of rent amount and mode of payment
– Name and address proof of the house owner
– To claim tax deduction under Section 80GG, you will have to submit Form 10BA online.
This declaration through this form confirms that you have taken a house on rent for that particular period and also, you have no other house at the moment.
Here are the steps to fill Form 10BA to avail the Section 80GG deduction:
2. Click on ‘e-file’ tab and choose ‘income tax forms’
3. The website will then display a window with an option ‘form name’. This will have a collection of various IT forms. Select Form 10BA
4. Then, click on the “Assessment Year” drop-down list and select the relevant one
5. Select “Submission mode” and choose “prepare and submit online”
6. Click on “continue” and the form will appear in another window
7. Fill in the details and submit the completed form.
The amount you can claim as tax deduction under Section 80GG
The lowest amount from the following is applicable for your tax deductions under Section 80GG:
1. Rs. 5000 per month
2. 25% of the annual salary of the individual or the HUF
3. The amount you arrive at after subtracting 10% of your total income from the annual house rent.