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ToggleWhen you earn income, you are liable to pay tax on it. The Income Tax Act, 1961 governs the laws related to the payment of tax in India.
The act has multiple provisions that help you reduce your tax liability. One of the commonly known sections is 80C, which allows tax exemptions of up to INR 1.50 lakhs per year if you invest in eligible instruments.
However, there are other sections that are also beneficial in reducing your tax liability. One of these is section 80GG. Read on to know more about it.
It is a special provision under Chapter VI-A of the Income Tax Act, 1961. It was introduced as a relief for taxpayers who paid rent but did not receive house rent allowance (HRA). This section allows them to claim deduction on the rent paid even if they are not receiving HRA.
Tax Rule 2A governs the deductions under section 80GG of the Income Tax Act, 1961. The deduction is the lowest of the following:
Example:
If an individual’s annual salary is Rs. 10 lakh and their monthly rent is Rs. 15,000, they can claim a maximum deduction of Rs. 60,000 under Section 80GG.
There are some exceptions when you cannot claim tax exemptions under this section, which are as follows:
However, if you live with your parents, you can still claim deductions under sec 80GG of the Income Tax Act, 1961. You have to make an agreement with them and pay the rent.
However, to be eligible for claiming the deduction, while filing the income tax returns (ITRs), your parents will have to show the rent as income.
To claim the benefits under this section, you must meet certain eligibility criteria, which are as follows:
This form is a declaration you have to file if you want to claim 80GG rent paid deductions. You must accurately give the following details.
You may get this form from your company’s Human Resource (HR) department or any tax office. You can also download it online.
If you are not receiving HRA from your employer but are paying rent for a furnished or unfurnished house, this section is beneficial in reducing your tax liability.
However, it is recommended you understand the eligibility criteria, maximum deduction limit, and other rules before claiming the benefits under this section.
No, you can claim either HRA benefits or rent benefits under this section of the Income Tax Act, 1961.
Individuals who do not receive HRA from their employers and live in a rented house are eligible. HUFs and NRIs are also eligible based on the guidelines applicable to this section.
The deduction is the lowest of the following:
Adjusted total income excludes long-term and short-term capital gains. However, short-term capital gains taxable at 10% under section 111A of the Income Tax Act, 1961 are excluded while determining the adjusted total income.
Additionally, it excludes any income under sections 115A to 115D, all deductions under sections 80C to 80U, and foreign earnings.
You must submit the following details to claim tax benefits under this section:
It is a declaration that you must file if you want to claim deductions on the rent paid under section 80GG of the Income Tax Act, 1961.