All about Deductions for rent u/s 80GG of Income Tax Act, 1961

Generally, salaried class persons get house rent allowance (HRA) from their employer as a part of their salary and are entitled to claim a deduction of rent paid by them while computing Income Tax Liability. But what about non-salaried persons or salaried persons not getting HRA. Where can they claim a deduction for rent paid by them?

To provide relief to non-salaried people or salaried persons without HRA, Section 8GG of Income Tax comes into the picture which provides a deduction for rent paid in cases other than where HRA is received. This section provides a deduction of rent paid subject to certain conditions.

Many persons are claiming deduction under this section while filing their ITR. However, now the Income Tax Department is validating the genuineness of these expenses and asking for various other information before allowing this deduction. Therefore, it is very important that every person should be well informed before claiming a deduction under this section to avoid any unnecessary e-proceedings.

In this article, a detailed discussion is carried out about the legal provisions of Section 8GG and all practical issues or steps to be taken so that this deduction can’t be denied.

1. Who is eligible for deduction u/s 80GG

Only an individual is eligible for claiming deduction u/s 80GG for rent paid provided he must not be having any income of house rent allowance u/s 10(13A) of Income-tax Act, 1961. Rent can be paid for furnished or unfurnished accommodations for the purpose of own residence.

2. What is the eligible amount of Deduction

• A deduction shall be provided for the actual rent amount in excess of 10% of the total income of the assessee.
• However, the such excess amount should not exceed lower of the following amount:
  1. INR 5,000 Per month; or
  2. 25% of the total income of the assessee

• For the purpose of computing 10% and 25%, the assessee’s total income shall be considered before allowing deduction under this section.

• Example:

1. Total Income:

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2. Rent Paid: INR 10,000 per month
3. Lower of the following amount shall be eligible for deduction u/s 80GG:
   • 60,000 (5,000 * 12)
   • 40,000 (Rent paid over 10% of total income)
   • 2,00,000 (25% of total income)

4. Therefore, a deduction of INR 40,000 shall be allowed.

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3. What are the conditions for claiming a deduction under 80GG 

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Deduction under Section 80GG can be claimed subject to the following conditions:

1. No deduction shall be allowed under this section where any residential accommodation is:
   • Owned by an individual, in his own name or name of spouse or minor child, or where such individual is a member of HUF, by such family, where he ordinarily resides or performs duties of his office or employment or carries on his business or profession; or
   • owned by the assessee at any other place, being accommodation in the occupation of the assessee value of which is determined u/s 23(2)(a) or 23(4)(a).

2. The assessee has filed a declaration in Form 10BA as per Rule 11B of Income Tax Rules.

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4. Guide to file Form 10BA

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Now various notices are received under Income Tax Act where Assessing Authorities have proposed to disallow deduction u/s 80GG as the assessee has failed to file Form 10BA. Therefore, it is mandatory to file Form 10BA for claiming deduction u/s 80GG. However, there is no due date provided under the Income Tax Act for filing Form 10BA.

For ease, a detailed guide is given below on filing Form 10BA:

1. Option to file a declaration in Form 10BA is available post login on the Income tax portal at the below path:

e-file>Income Tax Forms > File Income Tax Forms > “Persons not dependent on any Source of Income(Source of Income not relevant)”

2. For Form 10BA, the assessee is required to furnish the following information:
   1. Period
   2. Name of Landlord
   3. Annual Rental Amount Paid
   4. Mode of payment, i.e., cash, Cheque, transfer, etc.
   5. Address of rented premises
   6. PAN and Aadhar of Landlord (Not Mandatory)
   7. Address of Landlord

The assessee has the option to file details of more than 1 house

3. Declaration to the effect that no above-mentioned residential property is owned by the assess.

4. After entering all the information, the form can be submitted by clicking on the “File” button.

5. Documents required:

Though no documents are required to be attached to Form 10BA. However, the assessee is still suggested to keep the following documents for further submission with Income Tax Authorities:

• Rent Agreement
• Rent Receipts
• Transfer of rent from Bank Account
• Details of Landlord.