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Section 80GG is applicable to self-employed individuals as well as salaried persons. So if the individual is operating any business, he/she is as eligible for the deduction as a salaried employee of any organization. When compared to Section 10, the limit under Section GG is quite low. In a lot of cases, the individuals can claim a deduction of not more than Rs. 60,000 in a year. The rents have grown exponentially across the country and thus the maximum deduction that can be claimed is less compared to the other sections.
About Section 80GG
The taxpayer can claim the least of the three amounts given below as deduction under section
1. 25% of adjusted annual income
2. Amount paid as actual rent minus 10% of adjusted total income
3. Rs. 5000 per month or Rs. 60,000 annually
Adjusted total income is Gross total income except for long term capital gain, short term capital gain, income under 115A and 115D and all deductions under 80C to 80U (deducted from the gross total income).
Let us take an example and look at how to calculate the deduction under Section 80GG
As one can see, A can avail more tax deduction than B as the adjusted total income of A is more than that of B. If we see, 25% of annual income is a clause that is applicable in the first case. But, the adjusted total income when calculated gives the deduction quantum to A more than that of B.
If you are conducting a commercial or business activity in the place where you wish to avail the deduction under Section 80GG, this deduction is not applicable and the taxpayer cannot avail this deduction.
You cannot claim a deduction if you claim the benefit of an owned house in a location other than the above as self-occupied property.
The real estate markets have really taken a u-turn and thus it is highly likely that any deduction would be allowed other than Rs. 60,000 under the tax system. Also, if the taxpayer is paying rent that is less than Rs. 5,000 per month, it is altogether exempt from tax and thus no deduction will be available under Section 80GG. A lot of organizations have a salary offered to their employees which is inclusive of house rent allowance which in turn makes the taxpayer ineligible for the deduction under this section.
For claiming a tax deduction, the taxpayer should fill up form 10BA and submit it. It is a detailed form which has specifications of the rent paid etc. The tax offices are the most popular places for availing of this form. Nowadays since many organizations provide house rent allowance, the forms are available with their human resource departments. The details that need to be filled in the form are given below
This deduction can be claimed by salaried persons only. The taxpayer who is on the payroll of any organization can get a deduction of least of the following
1. 50% of basic salary if you live in metro cities and 40% of basic salary if you live in any other city
2. Rent minus 10% of basic salary
3. Actual HRA
HRA should be a part of the salary package for claiming this deduction. The deduction can be availed only for the period the taxpayer has resided in the accommodation. To claim the benefit the tenant has to also provide the actual rent.
1. What is 80GG in Income Tax?
It is a section that provides deduction based on rent paid by the taxpayers
2. What is 80GG rent paid?
It is a deduction availed under chapter VI A of the Income Tax act, 1961
3. Can house rent be deducted from taxes?
HRA is an allowance in Income Tax. It means a salary payment received towards rent payment is allowed as a deduction
4. How much rent income is tax-free?
A person is exempt to pay tax if the Gross Annual Value of the property is less than Rs. 2.5 lakhs.
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