Section 80GG - Deduction for Rent Paid

Introduction

Section 80GG of the Income Tax Act in India provides a deduction for individuals who do not receive any House Rent Allowance (HRA) from their employer or receive less than the basic exemption limit from their employer as HRA. This section allows such individuals to claim a deduction for the actual rent paid less 10% of their total income, subject to certain conditions.

The maximum deduction allowed under Section 80GG is Rs. 5,000 per month or Rs. 60,000 per year, whichever is lower. The deduction is available to individuals who do not have a self-occupied house or a house available for self-occupation in the city where they work or perform duties.

To claim this deduction, the individual must submit Form 10BA to their employer, which contains details about their rented accommodation and the rent paid. The employer will then deduct the TDS at a lower rate of 5% instead of the usual 10% TDS rate on the salary income of the employee.

Who is Eligible to Claim Tax Deductions under section 80GG?

Section 80GG of the Income Tax Act in India provides a deduction for individuals who do not receive any House Rent Allowance (HRA) from their employer or receive less than the basic exemption limit from their employer as HRA. Therefore, individuals who fall into any of the following categories are eligible to claim tax deductions under Section 80GG:

1. Salaried individuals who do not receive any HRA from their employer or receive less than the basic exemption limit as HRA.

2. Salaried individuals who do not have a self-occupied house or a house available for self-occupation in the city where they work or perform duties.

3. Salaried individuals who have a self-occupied house but choose to live in a rented accommodation due to reasons such as job transfer, employment in a new location, or construction or renovation of their own house.

How are Deductions Under section 80GG Calculated?

Deductions under Section 80GG of the Income Tax Act in India are calculated based on the actual rent paid by the individual, less a prescribed percentage of their total income. The maximum deduction allowed under this section is Rs. 5,000 per month or Rs. 60,000 per year, whichever is lower.

Here’s how deductions under Section 80GG are calculated:

1. Calculate the total income of the individual for the financial year, after deducting all other eligible deductions under various sections of the Income Tax Act.

2. Deduct 25% of the total income from Step 1 to arrive at the gross rent paid by the individual.

3. Subtract any other allowances or deductions claimed by the individual for rent from Step 2 to arrive at the net rent paid by the individual.

4. The maximum deduction allowed under Section 80GG is Rs. 5,000 per month or Rs. 60,000 per year, whichever is lower. If the net rent paid by the individual is less than this limit, then claim this limit as deduction under Section 80GG. If the net rent paid by the individual is more than this limit, then claim this limit as deduction under Section 80GG.

Filing Form 10BA

Form 10BA is a self-declaration form that is required to be filed by certain categories of NGOs (Non-Governmental Organizations) in India, in order to claim exemption from income tax under Section 12A of the Income Tax Act. Here’s a step-by-step guide on how to file Form 10BA:

1. Eligibility: Before filing Form 10BA, ensure that your NGO falls under one of the following categories:

– Registered under Section 12A and Section 80G of the Income Tax Act.
– Registered under Section 12AA and Section 80GGC (for foreign contributions) of the Income Tax Act.
– Registered under Section 35AC of the Income Tax Act for undertaking infrastructure projects.

2. Download Form 10BA: Visit the official website of the Income Tax Department and download the latest version of Form 10BA from the ‘Forms’ section.

3. Fill in the necessary details: Fill in all the required details, including the name and address of the NGO, its registration number, and the date of registration. Also, provide details about the sources of income, expenditure, and assets of the NGO.

4. Declaration: Make a declaration stating that the NGO has complied with all the provisions of Section 12A or Section 12AA or Section 35AC, as applicable. Also, declare that all donations received by the NGO are used for charitable purposes only.

5. Verification: Get the form verified by a chartered accountant or a practicing company secretary or a practicing cost accountant or a director of the NGO. The verification should be done within 12 months from the end of the financial year to which it relates.

6. Submission: Submit Form 10BA along with all supporting documents to the Income Tax Department within 30 days from the end of the financial year to which it relates. The form can be submitted online through e-filing or offline by post or hand delivery to the nearest Income Tax office.

From Where can This Form be Accessed?

You can access Form 10BA from the official website of the Income Tax Department of India. Here’s how:

1. Visit the official website of the Income Tax Department.

2. Click on the ‘Forms’ tab on the homepage.

3. Select ‘Exempt Organisations’ from the list of forms.

4. Scroll down to find Form 10BA and click on it to download the latest version of the form.

5. Alternatively, you can also search for Form 10BA using the search bar on the website by typing ‘Form 10BA’ in it.

How Can Property Owners Claim Tax Deductions under section 80GG?

Section 80GG of the Income Tax Act allows individuals who do not receive House Rent Allowance (HRA) from their employers and are paying rent for their residential accommodation to claim a deduction for the same. Here’s how property owners can claim tax deductions under Section 80GG:

1. Eligibility: To claim a deduction under Section 80GG, the following conditions must be met:

– The individual should not be receiving HRA from their employer.
– The individual should be paying rent for their residential accommodation.
– The individual should not have any other house or accommodation available to them at concessional rates.
– The individual should have submitted proof of rent payment to their employer, if they are salaried, or have maintained proper records of rent payment if they are self-employed.

2. Calculation of Deduction: The maximum deduction allowed under Section 80GG is Rs. 2,40,000 per annum. The deduction can be claimed for a maximum period of five years, unless the individual becomes eligible for HRA or any other house property tax benefit.

3. Proof of Rent Payment: To claim a deduction under Section 80GG, the individual should maintain proper records of rent payment, such as rental agreements, receipts, and bank statements. If the individual is salaried, they should also submit proof of rent payment to their employer.

4. Filing Income Tax Return: To claim a deduction under Section 80GG, the individual should file an income tax return (ITR) and include the deduction in their income tax computation. The deduction can be claimed in Part B (Computation of Total Income) of the ITR form.

Documents Required

The documents required to claim a tax deduction under Section 80GG of the Income Tax Act are:

1. Proof of Rent Payment: The individual should maintain proper records of rent payment, such as rental agreements, receipts, and bank statements. If the individual is salaried, they should also submit proof of rent payment to their employer.

2. Proof of Non-availability of Accommodation: The individual should provide proof that they do not have any other house or accommodation available to them at concessional rates. This can be in the form of a letter from the landlord stating that the property is not available for the individual’s use, or any other documentary evidence to support this claim.

3. Income Tax Return (ITR): To claim a deduction under Section 80GG, the individual should file an income tax return (ITR) and include the deduction in their income tax computation. The deduction can be claimed in Part B (Computation of Total Income) of the ITR form.

4. Identity and Address Proof: The individual should provide identity and address proof, such as a PAN card, Aadhaar card, voter ID card, passport, or driving license, to verify their identity and address.

5. Salary Slips or Profit and Loss Accounts: If the individual is salaried, they should provide salary slips for the relevant financial year. If the individual is self-employed, they should provide profit and loss accounts for the relevant financial year.

Conclusion

Section 80GG of the Income Tax Act provides a tax deduction for individuals who do not receive House Rent Allowance (HRA) from their employers and are paying rent for their residential accommodation. To claim this deduction, the individual must meet certain eligibility criteria, maintain proper records of rent payment, provide proof of non-availability of accommodation, file an income tax return (ITR), provide identity and address proof, and provide salary slips or profit and loss accounts (if applicable). The maximum deduction allowed under Section 80GG is Rs. 2,40,000 per annum for a maximum period of five years, unless the individual becomes eligible for HRA or any other house property tax benefit. It is essential to ensure that all required documents are submitted to claim this deduction and avoid any penalties or interest charges due to non-compliance.