Exemption from taxes on House Rent Allowance is a notion that was proposed to relieve employees from paying a considerable amount of their monthly wages to Income Tax. However, there are certain circumstances where salaried individuals do not receive a House Rent Allowance facility from their employers and are compelled to pay income tax on a necessary expenditure which they cannot afford. Can you still receive tax exemption on your rent?
This is the very purpose of Section 80GG of the Income Tax Act.
What is the definition of Section 80GG of the Income Tax Act?
Section 80GG of the Income Tax Act, 1961 states salaried and self-employed individuals who do not enjoy the facilities of House Rent Allowance as a part of their monthly salary, are eligible to receive tax exemption on their rented property.
Who is eligible to receive the exemption?
If you meet the any of following criteria, you are eligible for a Section 80GG deduction:
- You have to be a part of a Hindu Undivided Family (HUF)
- You must be a salaried individual, which covers employees, self-employed professionals, and non-professionals.
However, if you receive House Rent Allowance facilities from your employer or have received HRA at any time during the financial year, you are not eligible for Section 80GG deduction. Receiving benefits from a self-occupied property in any location also disqualifies you from the same.
Amount of tax deduction under Section 80GG
The amount of Section 80GG deduction is set by the Income Tax Act, 1961. The lowest of the following is the amount of deduction you can claim.
- 25 percent of annual income
- Rent paid deducted by 10 percent of annual income
- Rs. 5000 per month (Rs. 60000 annual value)
However, it must be noted that your total annual income would be deducted under Section 115A or 115D, Sections 80C to 80U, capital gains, and rent paid under Section 80GG to calculate the modified ‘annual income’ mentioned above.
How to register for Section 80GG deductions?
You can easily register for Section 80GG deduction by filling up a 10BA form. It is a statement maintained by taxpayers to sustain a tax deduction under Section 80GG for rent paid on rental property. It should be filled up and submitted before putting forward Income Tax Return (ITR).
How to file the 10BA Form?
You can file a 10BA form online using the Income Tax e-Filing Portal. Required documents include your PAN Card and the name and address of the landlord of the rented property. A copy of the PAN Card of the landlord is also needed if your annual rent amount exceeds 1 lakh rupees.
To file the form online, you need to follow the following steps:
- Log into the Income Tax e-Filing Portal mentioned above. You may need to register first if you are using the site for the first time. The registration process is easy. Just provide the required details and you will be good to go.
- After login, you need to select e-File and click on Income Tax Forms from the dropdown menu.
- You have to select ‘Form 10BA’ from the Form Name list and ‘Prepare and Submit Online’ as the Submission Mode. Provide your PAN Card number and Assessment Year after that. After you’re finished, click on Continue.
- You have to fill in all the required details in the form and click on Preview and Submit to lodge the form. If you wish to complete it at a later time, click on Save Draft so you can continue from where you left off.
Q. Can I claim Section 80GG deductions after changing jobs?
A. If you have not received House Rent Allowance in any of the jobs, you are eligible to claim Section 80GG deductions. However, if your previous job offered HRA, you cannot claim deductions for that financial year. If your current job is offering HRA, you are ineligible for the same.
Q. Can I claim Section 80GG deductions while living with relatives or parents?
A. It is possible to receive Section 80GG deductions while living with relatives or parents if you pay a monthly rent to them and sign a rental agreement with them.
Q. Can a pension holder claim Section 80GG deductions?
A. According to Section 80GG, self-employed salaried individuals are eligible. Pension holders do not receive HRA so they can claim tax deductions.
Q. Can senior citizens claim Section 80GG deductions?
A. As long as they satisfy they are salaried individuals and do not enjoy benefits from HRA or owned property, they can claim tax deductions under Section 80GG.
Q. Can Non-Resident Indians claim 80GG deductions?
A. No, only resident Indian taxpayers are eligible to claim 80GG deductions.