Section 80GG Deduction on Rent Paid

Generally, Employers give an allowance for house rent as part of the salary paid known as House Rent Allowance or HRA which can be claimed as deduction by the employees for the rent paid by them. However, sometimes the employer pays the entire salary as basic salary without any bifurcation or in cases where the assessee is a self employed individual, HRA deduction is not available or in case of self employed person, HRA deduction is not available . Hence, in such cases a deduction is provided under section 80GG for rent paid for any furnished or unfurnished accommodation.

Quantum of Deduction:-Least of the following is allowed as deduction under section 80GG:-

1. a) Rs. 5000 per month
2. b) Actual rent paid minus 10% of Adjusted Total Income
3. c) 25 % of adjusted Total Income

Meaning of Adjusted Total Income :-Total Income excluding Long term and short term capital gains under section 111A and Income under section 115A or 115D. Also while calculating Adjusted Total income, deductions under section 80C to 80U are to be ignored.

Conditions to claim the deduction:-1) Must be self employed or salaried.

2) Deduction under HRA is not claimed.

3) Taxpayer does not own any residential accommodation either in his name or in the name of his HUF or spouse at the place where he resides or performs office duties or causes his business or profession.

4) The taxpayer does not earn any income under the head Income from house property in respect of a residential property.

5) Form 10BA must be filed with details of payment of rent.

Example:-Mr. X earns Income of Rs. 6,50,000/- (without any deduction) and pays a house rent of Rs.1,80,000/-. Hence, Deduction under section 80GG is calculated as follows:-

• Actual rent paid minus 10% of Adjusted Total Income i.e Rs.1,80,000 – Rs.65,000 = Rs. 1,15,000/-
• 25 % of adjusted Total Income i.e 25% of 6,50,000 = Rs.1,62,500/-
• 60,000 (Rs. 5000 per month)

Hence, Rs.60,000/- being least of above would be available as deduction under section 80GG.

A specimen of Form 10BA is attached for reference.

Download FORM 10BA

Kartik M Jain & Associates, CA in Pune is a professionally managed firm serving domestic and international clients providing services relating to direct and international taxation, indirect taxation, auditing and assurance and Consultancy. It is amongst the best CA firms in Pune. With a team of expert and experienced Professionals, The firm aims to provide quality and effective services. The firm provides complete end to end solutions to your complete business needs under one roof. Our sister Firm, Payal K Jain & Associates, a Company Secretary in Pune provides services in relation to Company Formation in Pune and across India, Corporate Law and Compliance, ROC filings, FEMA, Trademark Registration, etc.

Our Services :-  GST consultation, Chartered accountant, Income Tax consultancy, Corporate law, International Taxation, Transfer Pricing, Regulatory & Advisory Services.