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Deduction for rent paid – Section 80GG

Do you pay rent but don’t get a house rent allowance (HRA)? Don’t think you can not get any income tax benefit. You can qualify to save tax under section 80GG of the Income Tax (IT) Act if you satisfy certain conditions. Read on.



Salaried people who pay rent and get a house rent allowance (HRA) can claim exemption of that amount in most cases.

(To know more, please read “Income Tax (IT) treatment of House Rent Allowance (HRA)”)

But what if you are not salaried? What if you are a businessman paying rent? Or, what if you are salaried but do not get any HRA? Can you get any income tax benefit?

Yes, you can. You can claim deduction of the rent paid if you satisfy certain conditions.

Who can claim deduction?

Any individual can claim the deduction u/s 80GG. Irrespective of whether you are a salaried individual, or a business person, you can claim deduction under Sec 80GG.

Of course, you need to be paying rent, and for your own accommodation.

Thus, if you are paying rent for a house where your parents live, you can not claim deduction u/s 80GG. Similarly, if you are staying in a house but your spouse is paying the rent, you can not claim any deduction.

You can claim deduction for either furnished or unfurnished accommodation.


Restrictions on claiming the deduction

There are certain restrictions in this section. You can not claim deduction u/s 80GG if:

  • You receive HRA from your employer (or you received HRA from your current or previous employer at any time in the year)
  • You or your spouse or your minor child owns a house at the place (city / town / village) where you normally stay, work or conduct business
  • You are a member of a Hindu Undivided Family (HUF), and the HUF owns a house at the place where you normally stay, work or conduct business
  • You own a house at any other place and claim concessions of self-occupied house property for it (For example, tax benefit of a home loan for the house)

Amount of deduction under section 80GG

So, how much can you claim as deductible u/s 80GG?

The amount allowed as deduction is the minimum of the following:

  • Rent / lease amount paid less 10% of your total income
  • Rs. 2,000 per month
  • 25% of your total income

Here, Total Income means:

Your Gross Total Income

Less long term capital gain, and short term capital gain that would be charged at a concessional tax rate (like STCG from sale of shares)

Less all deductions other than the deduction under Section 80GG


Other Conditions

Form 10BA

You need to declare that you are paying the rent. This has to be done by filling up and filing from 10-BA.

Download From 10BA (Declaration to be filed by the assessee claiming deduction under section 80GG) here

(You need to be logged-in to download Form 10BA. Please take advantage of the free registration that takes less than a minute. To know the benefits of registration, please click here.)

City / Municipality

The deduction u/s 80GG is available only if the house is situated within specified municipal areas. However, all major cities are a part of the specified municipal areas.

Example

Let’s assume the following (amounts per annum):

Basic: Rs. 4,00,000
DA: Rs. 50,000

You pay a rent of Rs. 5,000 per month.


Here, the deduction that you can claim is the minimum of:

1. Rent / lease amount paid less 10% of your total income:

(Rs. 5,000 * 12) – 10% of (Rs. 4,00,000 + Rs. 50,000)
= Rs. 60,000 – Rs. 45,000
= Rs. 15,000

2. Rs. 2,000 per month

That is, Rs. 24,000 per year.

3. 25% of your total income

25% of (Rs. 4,00,000 + Rs. 50,000)
= Rs. 1,12,500.

Thus, you would be able to claim a deduction of Rs. 15,000.

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