Section 80GG of Income Tax Act & Deductions in Respect of Rent Paid, Conditions & Eligibility

Usually, HRA forms part of your salary, and you can claim a deduction for HRA. If you do not receive HRA from your employer and make payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, you can claim a deduction under section 80GG towards the rent that you pay.

An individual should reside in a rented property and not own property in the same city to claim a deduction under Section 80GG. If the employer provides a Home Rent Allowance (HRA) as part of the monthly salary, an individual will not be eligible to claim a deduction under this section.

Section 80GG deduction is applicable to salaried and self-employed professionals. Thus, if an individual is a business owner, he/she will be eligible to claim tax deductions under this section. Individuals residing in their parents' property, which they own, are also eligible to claim Section 80GG benefits. However, such individuals should sign a rental agreement with their parents and pay rent to them. The rental amount paid to their parents will be taxable when they file their ITR.

Note: Both the HRA exemption and section 80GG deduction would be available under the old tax regime, not under the new tax regime.

Eligibility for Claiming Deduction under Section 80GG

A taxpayer must fulfil the following conditions to claim a deduction under Section 80GG:

• You should have opted to pay tax under the old tax regime (i.e., he should opt to move out of the applicability of Section 115BAC(1A).
• You have not received HRA from an employer at any time during the year for which you are claiming 80GG. The HRA component should not form part of your salary to claim 80GG.
• In case you own any residential property at any place for which your income from house property is calculated under applicable sections (as a self-occupied property), no deduction under section 80GG is allowed. In case you own any residential property at any place for which your income from house property is calculated under applicable sections (as a self-occupied property), no deduction under section 80GG is allowed.
• You will be required to file Form 10BA with details of the payment of rent.
• If your rent amount exceeds Rs.1 lakh per annum, you will have to submit the PAN card of your property owner to claim the deduction.
• You should not have claimed the HRA at any time during the financial year. If you have changed jobs and received an HRA deduction from your previous employment in the financial year, you will be ineligible to claim a deduction under this section. 

Eligible Amount of Deduction Under 80GG – 80GG Deduction Limit

The lowest of these will be considered as the deduction under this section- 

• Rs.5,000 per month or 60,000 per year
• 25% of the total income before allowing deduction for expenditure under this section
• Actual rent less 10% of income before allowing deduction for expenditure under this section

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How to Fill Form 10BA?

Form 10BA is a declaration that has to be filed by an individual who wants to claim a deduction under section 80GG for rent paid on rental property. It is a declaration that you are not claiming the benefit of a self-occupied property on the house in any other location or the same location as you are employed. Following are the details to be filled in 10BA:

• Name and PAN of assessee 
• Full address of assessee
• Tenure and rent amount 
• Rent payment mode
• Name and address of the landlord
• PAN of the landlord if rental is above INR 1 lakh
• A declaration that no other house property is owned by the assessee himself or in the name of spouse/minor child or by the HUF of which he is a member.

How to get Form 10BA?

Individuals can get Form 10BA from the organisation's HR department or tax offices. They can also download the form online from the Income Tax website.

How to Claim Deduction under Section 80GG?

Eligible individuals can claim the deduction while filing ITR (under the old tax regime) when they satisfy the following conditions: 

• They must be paying rent for the property where they are currently residing.
• They should not own property in the same city or location as their workplace. If they own a property within the city but live in a rented property, Section 80GG will not be applicable to them.