As a tax payer, there are often certain situations where miss out to claim a deduction. Section 80GG is one of those areas where most of the tax payers fail to realize that a hidden deduction can be claimed. So, without any further delay, let’s see what Section 80GG is all about!
What is Deduction 80GG?
The Section 80GG is a deduction which a tax payer can avail in respect to the house rent paid. It should be noted that no other similar deduction has been availed by the tax payers for the same AY, else the opportunity under this section will be lost. Issues such as House Rent Allowance from employer, etc., should be left out in order to claim deduction under this section.
Deduction 80GG Eligibility
There are certain criteria which a tax payer must satisfy in order to claim deduction under Section 80GG. They are:
Status of the tax payer: The benefit of deduction under this section is only available to individual or HUF. Entities such as companies, organization, etc., are not allowed to claim the benefit of deduction for rent paid.
Employment of tax Payer: The tax payer should either be employed in a business or should be a salaried person. If he receives House Rent Allowance [Sec 10 (13A)] from his employer, then the benefit under Section 80GG will not be available to him.
Ownership of Property: The business place or office of the tax payer should not be owned by the tax payer himself, spouse, children or HUF. The place of profession/ business should be owned by some other party.
Other Properties owned by the tax payer: There may be a situation where the tax payer may be owning a property and is currently living at a rented place. In this case, the owned property shouldn’t be shown as Self Occupied and will be deemed to be let out.
How to claim Deduction for House Rent Paid Deduction 80GG
The IT Department offers deduction under Section 80GG by selecting the LEAST amount from below:
- INR 5, 000/ month
- Total Rent Paid LESS 10% of total income 1
- 25% of total income.
Now, let’s take an example. Suppose Mr. Sumit has an annual income of INR 4, 00, 000 and has paid an annual rent of INR 1, 20, 000. So, what deduction will he have under Section 80GG?
Here, we will take note of these figures.
FIGURE 1- INR 5000 per month INR 60, 000
FIGURE 2- Total rent – 10% of Total Income= 1, 20, 000 – 40, 000 INR 80, 000
FIGURE 3 – 25% of 4, 00, 000, INR 1, 00, 000
The least of the above three figure will qualify as a deduction under Section 80GG. Therefore, in the present case, Mr. Sumit will have a deduction of INR 60, 000.
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- Total income means total income of the assessee arrived at after allowing all documents including deductions u/s 80C to 80U except section 80GG, and also excluding short-term capital gains taxable u/s 111A and long-term capital gains.