Section 80GG offers a valuable deduction for individuals and HUFs paying house rent without getting HRA benefits
Section 80GG of the Income Tax Act provides significant relief for individuals paying house rent without receiving House Rent Allowance (HRA) from their employers. This deduction is beneficial for both salaried employees and self-employed individuals. Let’s delve into the eligibility criteria, calculation, and exceptions related to this tax deduction.
Eligibility Criteria for Section 80GG Deduction
To avail of the house rent deductions under Section 80GG, you must meet the following conditions:
- Type of Taxpayer: You must be an individual or a Hindu Undivided Family (HUF). Businesses cannot claim deductions under this section.
- Employment Status: Both salaried and self-employed individuals are eligible, provided they do not receive HRA from their employers.
- No HRA Benefits: You should not have received any HRA benefits during the fiscal year. If HRA has been received, you are not eligible for this deduction.
- Form 10BA: Submission of Form 10BA is mandatory to declare that you are not claiming benefits for Self-Occupied Property in any location.
- PAN Requirement: If the annual rent exceeds Rs. 1 lakh, you must submit your landlord’s PAN card details.
Calculation of Deductions Under Section 80GG
The deduction amount under Section 80GG is the least of the following:
- 60,000 annually (i.e., Rs. 5,000 per month).
- The total rent paid minus 10% of your total income.
- 25% of your annual salary.
Exceptions to Section 80GG
There are certain exceptions where house rent deductions cannot be claimed:
- Ownership in the Same Location: You cannot claim a house rent deduction if you own a house in the same city where you are employed or conduct business.
- Self-Occupied Property: If you claim benefits for a self-occupied property in another location, you are ineligible for deductions under this section. However, if you live in one city and own a house in another city, the owned house will be considered rented out.
- Living with Parents: If you live with your parents, you can still claim deductions by entering into a rental agreement with them. Pay at least Rs. 60,000 annually as rent to your parents, who will then need to declare this amount as income.
Conclusion
Section 80GG offers a valuable deduction for individuals and HUFs paying house rent without HRA benefits. By understanding the eligibility criteria, correctly calculating deductions, and being aware of exceptions, you can effectively maximize your tax savings. Always ensure to comply with all requirements, including the submission of Form 10BA and the landlord’s PAN details if applicable.
Optimize your tax benefits and reduce your taxable income by leveraging the provisions of Section 80GG wisely!
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