Those individuals who do not use the house rent allowance are eligible for a tax deduction due to a special provision found in Chapter VI-A of the Income Tax Act of 1961, Section 80GG.
An individual must live in rented housing to qualify for the tax deductions provided by this provision of the Act. Additionally, the house rent allowance (HRA) now offered by their company should be excluded from the monthly compensation package.
Deductions under Section 80GG are available to qualified self-employed professionals and salaried professionals. Therefore, an individual who operates a business is in the same position as their salaried counterparts to claim this tax deduction if that individual also operates the business.
Eligibility to claim deduction under Section 80GG
To be eligible for a deduction under Section 80GG, a taxpayer is required to satisfy the following conditions:
- You are either self-employed or a salaried employee. It is also possible for a Hindu Undivided Family (HUF) to submit a claim for the deduction. However, businesses are not eligible to take advantage of this deduction.
- You cannot claim deductions under section 80GG since you did not receive any HRA payments from an employer during the financial year in concern. If you want to claim the 80GG deduction, the HRA portion of your salary shouldn't count toward it.
- You cannot claim the 80GG deduction since an employer has not paid you HRA at any point during the year in concern. If you want to claim the 80GG deduction, the HRA portion of your salary shouldn't count toward it.
- You, your spouse, any minor children you may have, and any HUF of which you are a member does not own any residential accommodation in which any of you now reside, perform office tasks, work, or carry on any business or profession.
- Suppose you possess any residential property at any location for which your income from house property is determined under applicable sections (as a self-occupied property). In that case, you are not eligible for a deduction under section 80GG. This is because section 80GG does not apply to self-occupied properties.
- You will be required to submit Form 10BA with specific information regarding the payment of rent.
- If the annual rent you pay is more significant than one lakh rupees, you must provide the PAN card of the person who owns the property to be eligible for the deduction.
- You were not permitted to claim for the HRA at any point throughout the year. If you have moved on to another job during the current financial year and were entitled to an HRA deduction from your last place of employment, you cannot claim a deduction under this section.
80GG deduction limit
The deduction for this section will be determined based on the item that is lower than the others:
- 5,000 rupees per month or 60,000 rupees total per year
- 25% of the total income (not including long-term capital gains, short-term capital gains under section 111A, and income under section 115A or 115D, as well as deductions under sections 80C to 80U).
- Additionally, income is calculated before any deductions are made in accordance with Section 80GG.
- The actual rent minus 10% of the monthly income
Claim deduction under Section 80GG
When filling out their ITRs, persons who are eligible to do so can claim the deduction if they satisfy the following conditions:
They must be paying up with the monthly payments for the rental home where they reside.
They shouldn't have any property holdings in the same town or region where they work. Section 80GG will not apply to them even if they buy a property within the city limits as long as they continue to rent their main home.
Filing Form 10BA
As was mentioned before, completing a Form 10BA is required to qualify for the tax benefits provided by Section 80GG. Before submitting Form 10BA, one is required to fill in the following details, which are listed below:
- Complete address, including a postal code
- Name and Permanent Account Number(PAN) of the Assessee
- Method of payment
- Duration of residency, measured in months
- Rental amount
- Name and address of the person who owns the property
- A declaration that mentions the assessee, their spouse, or any minor children do not own any additional residential property.
- If the rent paid in a particular financial year is more than one lakh rupees, the owner of the rented property must provide their PAN number.
The following information is provided together with the Form 10BA:
The name of the assessee, their PAN, and their complete address.
Important factors to consider are the duration, total amount, and payment method.
A declaration that the assessee, his spouse or minor child, and the HUF that he is a member of do not own any other residential property.
The full name of the landlord and their address.
The landlord's PAN number must be provided if the rent is more than one lakh rupees.