80GG Deduction on Rent
The professional guidance on income tax matters is must for each individual. On this website, we can easily learn the provisions which can benefit us in saving the amount of income tax, we can plan income tax as per rules of income tax act. The professional guidance site is particularly meant to help the people in carrying out their financial operations. The deduction under section 80GG is usually not cleared and the DDOs become confused in providing this deduction to the employees not being provided any House Rent Allowance against the amount of rent paid by them.
Deduction Under Section 80GG:
An individual who gets salary from the employer
usually received House Rent Allowance (HRA) as a part of the salary. On the
HRA, he claims the exemption of income tax depending upon the amount of rent
paid. But what will happen if HRA is not received and he is paying rent? In
Income Tax Act, the Deduction under section 80GG is particularly for the
individuals who are paying rent but not received HRA from the employer. The
deduction under section 80GG can be claimed and even the individual can
communicate the employer or Drawing and Disbursing Officer (DDO) regarding
consideration of this deduction to be claimed by him, while deducting Tax
Deduction at Source (TDS) from his salary. This will reduce the tax liability of
the individual.
Deduction for Rent Paid:
The DDOs should also consider this deduction
while deducting Tax Deduction at Source (TDS). The employees residing in rented
house and getting House Rent Allowance usually claim exemption under section 10
(13A) of income tax. But the employees who are not getting House Rent
Allowance, can claim deduction for rent paid if the following conditions are
satisfied:
(i) He is not getting House Rent Allowance and
not claiming exemption under section 10 (13A) of the Income Tax Act. It is must
to ensure that the HRA should not be received any time during the financial
year for which income tax is being computed.
(ii) He has no self-occupied property being
considered in ‘Income from House Property’ head of the Income Tax while
computing income tax liability
(iii) He or his spouse or his child or his HUF
don’t own any residential property at the place of posting or at the location
he is carrying employment or self-employed activities. Yes! A self employed
person can also claim deduction under section 80GG for the rent paid.
(iv) He should be salaried or self-employed
individual as per Income Tax Act.
Deduction of 80GG for Contractual Workers:
Usually, a person working on contract receive
fixed emoluments from the employer without House Rent Allowance (HRA) and in
order to carrying out the assigned work, he took residential accommodation on
rent at the place of his current residence or where he performs and carry out
business activities. He can calim the deduction of 80GG while computing and
paying the income tax provided he completes the above stated conditions for
claim of deduction under section 80GG.
How to claim deduction?
Before claiming the deduction in Income Tax
Return (ITR), it is mandatory to file Form no. 10BA on the website of Income
Tax Department. In the form, the assessee will be required to give the details
of rent paid. The website meant to file Income Tax Return i.e.
incometaxindiaefiling.gov.in can be accessed and in ‘Forms’, select Form 10BA
and fill it there. After filling, click the button of Submission. What does
Form 10BA cover?
It is nothing except the certification on part of
individual regarding payment of rent with details of the person to whom payment
of rent is made. It also certifies that the individual satisfies the conditions
of not having residential accommodation at the place of employment or business
activities. The lines for certification are, “I ______________ do hereby
certify that during the Previous Year _____________ I had occupied the premise
located at ____________ for the purpose of residence for a period of ________
months and I paid ________ amount in cash or through cheque towards payment of
rent to the landlord ______________. I also certify that no other residential accommodation
is owned by me or my spouse or my child or my HUF at the place of my residence
or place where I perform official duties”.
Deduction under section 80GG – Computation:
There are three values required to be computed
out of which the lowest can be considered as deduction under section 80GG:
(i) Rs. 5000 per month for the period for which
rent is paid.
(ii) 25% of Total Income. Here Total Income is
the income after all deductions 80C to 80U but before providing deduction under
section 80GG. Ensure that the total income excludes the long-term capital gain,
short-term capital gain under section 111A and Incomes under section 115A or
115D.
(iii) Rent Paid – 10% of total income. Here Total
Income is same as described in (ii). In other words, it is excess of actual
rent paid over 10% of income. 'income without including Capital Gains and then
deduct the deductions from 80C to 80U except 80GG'.
Example of Deduction under section 80GG:
Mr. A is working on contract and taking salary
Rs. 50000 per month from his employer. His Total Income after deducting
deduction 80C to 80 U (except 80GG) is Rs. 4,00,000. He is paying Rs. 8000 per
month in form of rent at the location of his job. How he can claim deduction
and to what extent, he will be eligible to claim the deduction?
In this case, Mr. A has to firstly submit the
form 10BA on the website of e-filing income tax return. Thereafter, he can
claim at least of the following as deduction under section 80GG:
(i) Rs. 5000 per month i.e. 5000 x 12 = 60000
(ii) 25% of Total Income i.e. 400000 x 25% =
100000
(iii) Rent Paid – 10% of Total Income i.e. (8000
x 12) – (400000 x 10%) = 96000 – 40000 = 56000.
Amount deductible under section 80GG will be
56000, least of the above three.
*Copyright © 2019 Dr. Lalit Kumar. All rights reserved.
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