WHAT IS SECTION 80GG?
As per section 80GG of the income tax act, 1961- An individual is entitled to claim deduction on the rent paid on the basis of premises occupied by him. Getting tax exemption under section 80GG depends on your salary, rent amount, staying city and the HRA you are receiving.
If you are an employed individual, paying rent for a place but not getting HRA from your employer to claim the Tax benefit, you are still entitled to receive House rent allowance (HRA) under section 80GG of the income tax act, 1961. The main aim of claiming HRA is to minimize your tax liability. House rent allowance is given to individuals to cover expenses related to rented accommodation. It is only applicable to the individuals living in a rented accommodation. This allowance is fully taxable for those who are having their own houses and don’t live in a rented accommodation.
CONDITIONS TO BE FULFILLED UNDER SECTION 80GG
You have to meet the following conditions to avail deductions on house rent under section 80GG of the income tax act, 1961 –
1) You should be an individual or Hindu undivided family (HUF). A company is not entitled to claim HRA.
2) You need to be salaried or self employed
3) You should not be getting HRA as a component in your salary.
4) You, your wife and your spouse should not have any property in his or her name.
5) You should not have received HRA at any time during the year for which you are claiming exemption.
6) You need to submit the PAN card details of your landlord, if your rent amount exceeds 1 lakh in a year.
7) You can also claim rent even if the rented house is semi-furnished or fully-furnished.
8) As an employed person, you need to fill & submit FORM 10BA ensuring that you are not claiming benefit of self-occupied property in the same or any other location.
DEDUCTIONS UNDER SECTION 80GG
An individual can claim relief on house rent from the least of the following amounts given below -
1) Rs.60,000 annually (Rs.5000 per month)
2) Rent paid minus 10% of the total income
3) 25% of the total income of an employee
Let us consider an example, if the total income of an employee named Arun is Rs.400,000 and he is paying rent of Rs.16,000 per month i.e. Rs.192,000 annually, Calculate how much deduction he can get under section 80GG -
1) As per the first condition, he can get exemption of Rs.60000
2) As per the second condition, the exempted amount will be –
(Rent paid – 10% of total income)
Rs.192000 – 40,000 (10% of 400,000) = Rs.152000
3) As per the third condition, the exempted amount will be -
25% of total income
25% of Rs.400000 (Total income) = Rs.100000
On the basis of the above three conditions, ram is entitled to claim the least amount i.e. Rs.60000.
DOCUMENTS REQUIRED TO CLAIM DEDUCTION UNDER SECTION 80GG
1) Rent agreement & Rent receipts.
2) PAN Details of the landlord, if rent amount exceeds Rs.100000.
3) Filing form 10BA which ensures that you are not claiming benefit of self-occupied property in the same or any other location.
EXCEPTIONS UNDER SECTION 80GG
You cannot claim house rent allowance in the following situations –
1) If you owned a house in your employed location or where you are operating a business.
2) If you are having one more house in any another location as self-occupied.
In case, if you are living with your parents, you can still avail benefit of HRA under section 80GG. You need to enter into a rent agreement with your parents and has to pay them Rs.60000 annually as rent and your parents need to show the same rent amount as income in their income tax declaration form. By this way, you can easily avail the benefit of HRA under section 80GG.