House rents can be a significant strain, especially in cosmopolitan areas where finding a rental home is difficult. The rent amount is increasing with each passing day, as the demand for rented houses is relatively high.
Every financial year, most people create a tax saving checklist to understand how and where they might gain tax benefits. Individuals who must rent a home but do not receive HRA (House Rent Allowance) may have their monthly earnings affected. Section 80GG of the Income Tax Act of 1961 allows you to claim a deduction for the amount of rent you pay each year.
What is Section 80GG of the Income Tax Act?
A person can claim a deduction on the rent paid for a furnished or unfurnished house under Section 80GG of the Income Tax Act of India, which can be found in Chapter VI-A of the Income Tax Act of India. The house should be used for its intended purpose of being a residence. The deductions are the expenses you can deduct from your gross income for the year in order to calculate your net taxable income, which is the amount on which you will pay income tax.
Who is Eligible to Take Advantage of Section 80GG Tax Deductions?
As previously indicated, several requirements must be met in order to qualify for tax deductions under this unique section of the Internal Revenue Code. Here are some of the requirements that must be met in order to claim the Section 80GG deduction.
a. These tax deductions are only available to individuals and Hindu Undivided Families (HUF). Businesses and other businesses are not eligible for the same tax breaks when it comes to paying rent in a given fiscal year.
b. Salaried professionals and self-employed people can benefit from this provision as well. Even if they pay the rent, they are not eligible for Section 80GG income tax benefits if they have no income to speak of.
c. Those wanting to take advantage of this tax break must first submit a properly completed Form 10BA to the government. This form certifies that the person filing it has no claim to a self-occupied property in any location.
d. The Income Tax Act's Section 80GG was created specifically for persons who do not receive a House Rent Allowance from their employers. If an individual's salary is equal to or greater than the HRA amount, they are ineligible to claim income tax deductions for housing rent.
e. If the yearly rent expense exceeds Rs.1 lakh, the taxpayer must present a copy of the house owner's PAN card in order to qualify for tax benefits under Section 80GG of the Income Tax Act.
f. HRA should not have been claimed at any point during the fiscal year for which the tax advantage under Section 80GG is being claimed. For people who changed jobs in the past year, this is a vital period.
Even if a person does not receive HRA for a significant portion of the year, receiving it for a single month disqualifies them from claiming the yearlong respite.
g. People who live with their parents in a home that their parents own are also eligible for Section 80GG benefits. A person would be forced to sign a leasing agreement with their parents in order to do so. Furthermore, when the parents file their tax returns, the sum granted as rent will be taxable.
h. This clause also allows non-resident Indians to claim tax benefits. However, they should be handling rent for a home in India in order to put this in place.
How do you fill out Form 10BA?
As previously stated, Form 10BA is required for individuals seeking tax benefits under Section 80GG. It is a declaration that you have rented a home during the specified time period and that you have no alternative place to live. Before completing Form 10BA, a person must fill in the following information:
a. Complete address, including zip code
b.The assessee's name and PAN number
c. Payment options
d. Residency length in months
e. The rental fee
f. Property owner's name and address
g. A declaration that the assessee, his/her spouse, or minor child owns no extra residential property
h. If the cost of rent exceeds Rs.1 lakh in any given fiscal year, the rented property's owner's PAN card number is required.
Where can I get a copy of Form 10BA?
These forms are widely available from a variety of sources, including any reputable organization's human resource department. The form can also be obtained by going to a tax office. The most convenient location to look for one, though, is online. People can look for it on many official websites and download it.
Section 80GG Exceptions
Let's look at some of the exclusions to section 80GG:
a. You should not be the owner of a residential property in the area where you normally live or work.
b. If you have previously claimed deductions on residential property maintained in a different location, you will not be eligible for them. You can't claim HRA deductions if you live in one city but own a property or house in another.
Deductions Eligible Amount
The tiny amount can be claimed from the least of the following:
1. a quarter of your overall income (adjusted)
2. 5000 rupees each month/60,000 rupees per year
3. After deducting 10% of adjusted total income, total rent paid
*Adjusted total income refers to gross total income after subtracting Long Term Capital Gain or Short Term Capital Gain u/s 111A or NRI incomes, if any, already included in total income, as well as deductions u/s 80C to 80U of the Income Tax Act, except in this section.
Section 80GG is a simple and effective approach to claim an income tax deduction. However, the deductions may not always be enough to reduce your overall tax burden. In such cases, you can invest in a variety of financial instruments to help you with deductions under various parts of the Income Tax Act.
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