Claim Tax Benefit for Rent Paid u/s 80GG

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Section 80GG - Avail Tax Benefit on Rent Paid

Section 80GG – Avail Tax Benefit on Rent Paid

Section 80GG is one of lesser known sections which can be used by taxpayers to lessen their tax burden by claiming tax exemption for rent paid (in case HRA is not part of salary). This section can be used by be either salaried/pensioner or self-employed tax payers.

Conditions for Claiming Tax benefit u/s 80GG for Rent Paid

You can claim tax deduction on rent paid u/s 80GG at the time of filing tax return only if following conditions are satisfied:

  1. The deduction is available only for individuals & HUFs
  2. For salaried person to be eligible for tax benefit u/s 80GG, he should not receive HRA from his employer.
  3. Pensioners or Self employed do not have any HRA and so they can take advantage of 80GG
  4. No one in the family including spouse, minor children, self or HUF he is member of should own a house in the city you are employed or carrying your business.
  5. If you own a house in different city, you cannot show it as self-occupied. You have to consider it as deemed to let out – i.e. – you have to show rental income whether or not it’s actually put on rent.

Additionally, you need to fill form no 10BA to claim tax benefit u/s 80GG. This form is NOT to be submitted anywhere but kept with you for records to show to I-T department in case of scrutiny.

Free Download: Tax Planning Guide for FY 2016-17

Form 10BA to claim Tax deduction on Rent paid - Section 80GG

Form 10BA to claim Tax deduction on Rent paid – Section 80GG

Deduction allowed u/s 80GG:

The House Rent deduction is minimum of the below 3 numbers:

  1. Rs. 5,000 per month [increased from Rs 2,000 to Rs 5,000 in Budget 2016]
  2. 25% of annual income
  3. (Rent Paid – 10% of Annual Income)

Here Annual income refers to

  • Gross Total Income

Minus

  • Long Term Capital Gain,
  • Short Term Capital Gain  of 10% category,
  • Deductions under sections 80C to 80U except section 80GG and income of foreign company

Also Read: Best Tax Saving Investments

Illustrative Calculation u/s 80GG

Assume that Amit has annual income of Rs 5 Lakhs and he pays rent of Rs 10,000 per month. Here is his tax benefit for rent paid.

  1. Rs. 5,000 per month – Rs 60,000
  2. 25% of annual income – Rs 1,25,000
  3. (Rent Paid – 10% of Annual Income) – Rs 70,000 (1,20,000 – 50,000)

The tax deduction would be minimum of above 3 numbers = Rs 60,000

80GG in Income Tax Return Form

Tax exemption under section 80GG is part of Chapter VI A and has to be filled as you do for Section 80C in the ITR Forms.

Also Read: 11 Tax Free Components You Must have in Salary

Can HRA & 80GG Tax benefit be claimed Together?

In case you were salaried receiving HRA for some part of the financial year but paid rent for the entire year, you can claim benefit under both HRA & Section 80GG. For the period you received HRA, you should claim tax benefit on that through your employer. For rest of months you would get tax benefit u/s 80GG.

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8 thoughts on “Claim Tax Benefit for Rent Paid u/s 80GG

  1. hello mr. amit
    once i put 5000 PM rent but he show only 2000 PM exemption please healp me

  2. jagannath behera says:

    actual how much amount will be tax benifit on section 80gg

  3. Hello

    Can you tell what to do if following in the case:

    As self employed I pay Rs. 7600 per month rent in cash to Landlord

    But i don’t have any proof of this i mean rent receipts, or rent agreement nothing so how i can claim this under 80GG?

    Landlord is 80 years old person not high educated, don’t have any knowledge of tax, he don’t file ITR and he will not give rent receipts nor he will sign on any receipt even if i give him from myself, don’t have rent agreement because i’m living and paying him rent from 5 years so first 3 years he did rent agreement after that he got health issues so no agreement from two years just living and paying rent.

    At most what he can do is if someone ask him face to face then he tells that i live on rent with him and pay him monthly etc otherwise nothing in written!

    So is there any solution of this weird case or i think not?

    Thanks

    • The maximum amount you can claim through Section 80GG is Rs 5,000 per month. I don’t think there would be scrutiny for such amount as even for salaried payer they do not need PAN number if the rent is less than Rs 8,250 per month.

      However in rare case of scrutiny, the only option you have to get rent receipt from your landlord. As the rent is paid in cash you have no other proof. Also this would be easy if your landlord is paying tax on this rental income. If not its almost impossible to proof that you paid rent and how much!

      • Hello Amit, thanks for clearing this you have written one line that:

        (Also this would be easy if your landlord is paying rent on this rental income.)

        with this you mean if landlord is paying income tax on rental income? bit confused with “rent on this rental income”

        Also one thing wanted to ask for future, if in future i pay cheque per month rather then cash this will consider as any proof?

        Thanks

        • Sorry for the typo – have corrected that (rent to tax).

          If you pay by cheque or though online transfer at least you have a transaction to put your point. In cash you have NO say!

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