Section 80GG of the Income Tax Act: Everything You Need to Know
Buying a house is not always possible for everyone, so the next best thing is to rent a house. While it is true that a rented property does not always have the comfort of your own house, it still means that you have a place to come home to and relax and unwind! Moreover, considering how the real estate industry is booming even after the pandemic’s threat, cities and towns are now replete with several options that you can rent.
However, the amount of rent you pay can pose a problem to your savings and income. A comfortable rented house that has all the amenities and conveniences will not come cheap. And so, to help you save some money, the provision of Section 80GG of the Income Tax Act enables you to claim deductions on the rent you pay towards your accommodation.
What is Section 80GG of the Income Tax Act?
Section 80GG, which comes under Chapter VI-A of the Income Tax Act, states that a person renting a furnished or unfurnished residential property can avail of tax deductions on the rent payable. Hence, this section of the Income Tax Act allows you to claim tax deductions on rental accommodation.
Usually, salaried professionals receive an HRA or home rent allowance on which they can claim deductions. However, if you do not receive HRA from your employer, it does not mean you cannot claim deductions. This is where Section 80GG enables you to claim deductions.
By claiming the deductions on the rent, you can reduce your net taxable income and thus, save on taxes.
Who is Eligible to Claim Tax Deduction under Section 80GG?
You can claim tax deduction under Section 80GG if you meet the following criteria –
As an individual or Hindu Undivided Family (HUF), you can claim these deductions in the fiscal year for renting a residential space. The same benefit does not apply to businesses or corporate firms.
You, as a salaried or self-employed professional, can also claim the deductions provided you do not own a residential plot at your current location of residence or use the space to conduct official duties or carry out business activities.
If you have received HRA from your employer any time during the fiscal year, you cannot claim the Section 80GG tax benefit. Hence, if you have changed jobs in the same year, you should consider the HRA factor to check if you are eligible for the deduction.
You must submit the duly filled Form 10BA to the government, declaring that you do not own a self-occupied residential property anywhere. The income from your property will be calculated under separate sections, which will make you ineligible for 80GG.
You can claim the deductions if you have not received HRA even for a single month. Do remember that even one month’s HRA can make you ineligible for claiming benefits under 80GG.
In case you stay in the house your parents own, you can sign a rental contract and pay rent to your parents to claim the benefits of 80GG. Your parents can file returns on the taxable rent amount.
It is necessary for you to provide your landlord’s PAN card for claiming the deductions under 80GG if the annual rent amount is over ₹1 lakh.
If you are a Non-Resident Indian (NRI), you can still claim tax* benefits under Section 80GG. However, it is mandatory that you should be paying rent for a property in India.
You may also avail of the deductions if you do not own a property in another town/city while renting a house in another town/city. Therefore, even previous deductions claimed on your property in another location will be taken into consideration.
Filing Deduction under Section 80GG with Form 10BA
Form 10BA is an important requirement if you want to avail the benefits under Section 80GG of the Income Tax Act. The form is a declaration that you are staying in rented accommodation during a certain period and that you do not own any property. While filling the form is quite simple, it is crucial to note the details that have to be included –
Provide your complete address and the postal code
Your full name and PAN details
State the method of payment
The number of months of your residency
The cost of the rent
The property owner’s full name and address
A statement indicating that you, your spouse, or minor child do not own any additional residential property
The PAN details of the rented home’s owner (mandatory) if the annual rent in the fiscal year exceeds ₹1 lakh.
You can easily look for the Form 10BA online on the Income Tax Department’s website and download it if you want to claim the deductions online. Another way to procure them would be through the human resources department of any renowned organisation or even branches of tax offices.
What is the Amount Eligible for Tax Deductions?
You can claim the minuscule amount from least of the following:
₹5000 each month/₹60,000 each year
25% of your adjusted total income*
Total rent paid after deducting 10% of adjusted total income*
*The adjusted total income refers to the gross total income you arrive at after short-term capital gains (STCG) or long-term capital gains (LTCG) has been excluded under Section 111A or Section 115A or 115D (NRI income) or a range of deductions from 80C to 80U.
Life Insurance as a Tax-saving Investment in India
Claiming deductions under Section 80GG is a simple process, but if you want to save tax more efficiently, you can seek out other tax* saving options like purchasing a life insurance plan. With a life insurance policy such as Tata AIA life insurance, you get the dual tax* benefit of claiming deductions on the premiums paid for up to ₹1.5 lakhs, while the death benefits are exempt from taxes under Section 10(10D) of the Income Tax Act.
However lucrative a life insurance plan may be in terms of tax* benefits, always keep in mind that the main aim of having life insurance for your family should be to protect them from future financial uncertainties.
With a wide range of Tata AIA life insurance plans to choose from as per your needs, you can avail of a protective life cover benefit along with tax* benefits!
Good rented accommodation in big Indian towns and cities can be quite expensive. But if you want to ensure that you are not losing all the money you pay for rent, this could be a good time to look into 80GG tax benefits and claim the deductions!