If you don’t receive HRA (House Rent Allowance) but pay rent, you can still get a tax deduction on the rent paid under Section 80 GG of the Income Tax Act, 1961. The maximum deduction permitted under Section 80 GG is Rs 60,000 per annum (Rs 5,000 per month). You cannot get the benefit of this section if you (or your wife/minor child) own a house property. In order to claim the benefit of this section, you have to fill form 10 BA.
Who can claim deduction under Section 80G
Any employee/self-employed person who does not receive House Rent Allowance (HRA) and has not received HRA at any time during the financial year.
Deduction under Section 80GG
The deduction under Section 80GG is given to the least of the following :
- Total rent paid minus 10% of basic salary.
- Rs 60,000 per year (Rs 5,000 per month).
- 25% of the adjusted gross total income.
Tax Calculation under Section 80 GG
Illustration of Tax deduction under Section 80GG
Ramesh earns 5 lakhs annually (after all deductions) and stays in a rented accommodation for which he is not getting any house rent allowance. The annual rent being paid by Ramesh is Rs 1.5 lakhs. In such a case the deduction would be least of the following:
Condition 1: Monthly rental limit of Rs 5000 every month i.e. 60,000 per annum.
Condition 2: Rent paid i.e. 1.5 lakhs minus 50,000 (10 % of annual income) = 1 lakh.
Condition 3: 25% of the total annual income = 1.25 lakh.
In the example above, since Condition 1 is the least amount, Ramesh would be eligible for benefit as per condition 1 only.
Ramesh earns 3 lakhs annually (after all deductions) and stays in a rented accommodation for which he is not getting any house rent allowance. Ramesh pays 6,000 per month as rent for his house and the annual rent being paid is Rs 72,000. In such a case the deduction would be least of the following:
Condition 1: Monthly rental limit of Rs 5,000 every month i.e. 60,000 per annum.
Condition 2: Rent paid i.e. 72,000 minus 30,000 (10 % of annual income) = 42,000.
Condition 3: 25% of the total annual income = 75,000.
In the example above, since Condition 2 is the least amount, Ramesh would be eligible for benefit as per condition 2.
Form 10BA is basically a declaration filed by the taxpayer claiming his deduction under section 80GG. The form is very easily available at all tax offices, the HR department of the employer or it can also be downloaded from various websites.
Below mentioned are the details which the assessee needs to fill. The assessee should always ensure the details are fully accurate and updated.
- Name of the assessee with PAN.
- Full address of the premises with Postal Code
- Residency tenure in months
- Mode of payment
- Amount of payment
- Name and address of the landlord.
- In case the annual rental is more than 1 lakh for the assessment year, then the PAN number of the landlord is mandatory.
- Declaration to confirm that no other residential accommodation is owned by the taxpayer himself or in name of Spouse / minor child or by the HUF in which he is a member.