Section 80GG Hidden Deduction in Income Tax

When we think of Income tax deductions, we immediately navigate to the famous Section 80C. Every year the goal of any taxpayer is to ensure that they use the Rs 1.5 lakhs limit to the maximum. Thereby resulting in neglecting other sections which could provide similar if not better tax savings.

Section 80GG is one the most neglected section when it comes to Tax Savings. It provides deduction not only to self-employed, but also to individuals under employment wherein HRA does not form part of their Salary.

Following are the conditions to be fulfilled:

  • Assessee is Either Self-employed or salaried

  • Rent paid is for residential

  • HRA is not received for the period 80GG is claimed

  • Accommodation is either owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession

  • Accommodation is owned by the assessee at any other place for which Income from house Property is calculated under specified sections as a self occupied property.

  • Form 10BA with details of payment of rent is filed.

Although, if the return has been filed electronically, then, Form 10BA need not be submitted unless demanded by the Assessing officer.

Calculation of deduction:-

Deduction allowed is least of the following:

  1. Rs 5,000 per month ie., Rs 60,000 in a year.

  2. Rent paid (minus) 10% of Total Income

  3. 25% of the total income of the year

Note: The expressions "10% of his total income" and "25% of his total income" shall mean 10% or 25%, as the case may be, of the assessee's total income before allowing deduction for any expenditure under this section.

Example:

Mr. X's income is Rs 5,50,000 (after all deductions except Section 80 GG) and pays Rs 15,000 per month toward his home rent. In this case, deduction would be as follows:

  1. Rs 60,000

  2. Rs 125,000 [(15,000x12)-(10% of 5,50,000)]

  3. Rs 1,37,500 (25% of 5,50,000)

Mr. X can claim Rs 60,000 as deduction under Section 80GG

#rent #exemption #deduction #taxsaving

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