What is Section 80GG Deduction

Sec 80GG provides deduction of maximum Rs 60,000 per annum for the rent paid by a salaried person or self-employed person who is not a recipient of HRA from employer.  If HRA is part of salary package, then taxpayer can claim tax benefit for HRA under Section 10 (13A).

Calculation

The taxpayer can claim the least of the Following:

1. 25% of the total income
2. Actual rent paid minus 10% of total income
3. Rs 5,000 per month (Rs 60,000 per annum)

Total income mentioned above is calculated after making all deductions under Chapter VI-A but before making deduction under this section.

Conditions to be satisfied to qualify for 80GG tax deductions

• Taxpayer should not be receiving any house rent allowance exempt under section 10(13A).
• Rent incurred by the tax payer should exceed 10 % of his total Income.
• The accommodation should be occupied by the taxpayer for his own residence.
• The taxpayer or his spouse or his minor child or HUF where he’s a member should not own any accommodation at the place where he resides or performs his duty or carries his business or profession.
• Taxpayer should not own any accommodation for which value is determined as Self-occupied property under the chapter “Income from House Property”.
• To claim benefits under Section 80GG, a taxpayer has to fill declaration under Form 10BA.

Case Scenario

Mr Joe is a software engineer working with an IT company in Bangalore. He is getting a salary of Rs 580,000 per annum. He paid house rent of Rs 10,000 per month. He uses his rented house for his residence purpose and he or his spouse is not owning any other residential house in Bangalore or any other place in India.

• Scenario 1: He is not receiving HRA as part of his salary package.
• Scenario 2: He is receiving HRA of Rs 5000 per month as part of his salary package.

Mr Joe can claim deduction only if he satisfies the all the conditions mentioned in Sec 80GG of Income Tax Act.

Scenario 1: Mr Joe is not receiving HRA as part of his salary package.

Since Mr Joe satisfied all conditions, he will be eligible for the deduction under 80GG if he files the declaration in Form 10BA.

Least of the following amounts will be allowed as deduction

Mr Joe will be eligible for Rs 60,000 as deduction under sec 80GG for the Ay 2022-23.

Scenario 2: Mr Joe is receiving HRA of Rs 5000 per month as part of his salary package.

Since Mr Joe is getting HRA as part of his salary package, he won’t be eligible for deduction under sec 80GG.