November 1, 2020

Itax Software

Income Tax Software

Get Tax Benefit on rent paid if not getting HRA in Section 80GG Deduction, with Automated All in One TDS on Salary for F.Y.2017-18

All salaried are very much familiar with HRA and how to get the benefit of the rent they pay. However, what about those who not get HRA in their salary or for self employed? Will they still get rent benefit? The answer to both the questions is Section 80GG of Income Tax.

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So as I said above this section only applies to those who have not availed HRA in their salary or not claiming the deduction on their rent in any of the other sections of income tax.  Below are a few conditions to avail the deduction under this section.
  1. This section is only applicable to Individual or HUF.
  2. Tax Payer may be either salaried or a self-employed. However, must not be getting HRA.
  3. Tax Payer himself or spouse/Minor Child/HUF of which he is a member should not own any accommodation at a place where he is doing a job or business.
  4. If Tax Payer owns house at a place other than the place noted above, then the concession in respect of self occupied property is not claimed by him [Under Section 23 (2) (a) or 23 (4) (a)].
  5. Tax Payer has to file a declaration in Form No.10BA regarding the expenditure incurred by him towards the payment of rent.

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How much amount of deduction one can avail under Sec. 80GG?
If the above five conditions are satisfied, the amount deductible under Section 80GG is LEAST OF THE FOLLOWING.
  • Rs.5, 000 per month;
  • 25% of total income of taxpayer for the year; or
  • Rent Paid less 10% of total income (Rent Paid-10% of Total Income).
What is total income for the purpose of Sec. 80GG?
We can calculate it as below.
Total Income=Gross Total Income-LTCG-STCG-Income referred under the Sec.115A-Amount deductible under Sec.80C to 80U (except Section 80GG)
Let us try with one example-
Mr. X’s total income (calculated as per above formula) is Rs.4, 00,000. He pays an annual rent of Rs.1, 50,000. Then least of the below will be applicable for deduction under Sec. 80GG.
  • Rs.60, 000 per year.
  • Rent Paid-10% of Total Income=Rs. 1,50,000-Rs.40,000=Rs.1,10,000.
  • 25% of Total Income i.e Rs.1, 00,000.
So least of the above will be Rs.60, 000, which one can claim under Section 80GG for that particular FY.

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