Buying your own house always being a priority for the salaried person, although there are several options available in the market to get the home loan. An option of a home loan is also not easy for the employee, most prefer to rent the house. Deduction under section 80gg is introduced to avail the benefit of taxation for the rent amount paid.
What is Deduction u/s 80GG?
Usually, salary received from your employer consist of HRA.
In some cases, consolidated salary received, which doesn’t mention HRA separately.
Section 80GG plays a role for you for the exemption of HRA amount paid for rent.
There is an option available in ITR form u/s 80GG to avail rent paid.
Also Read: What is Form 15G Form 15H?
How deduction u/s 80GG works?
Section 80 GG also comes with some of the boundation, not every individual get the benefit of it.
Following the condition required to fulfill the benefit of 80gg.
- Must be an individual employee for the financial period.
- You have not received HRA from your employee in any form during the financial year for which you are claiming 80GG.
- You or your family member (spouse or your minor child) do not own any residential accommodation at the place where you currently reside.
- Deduction under section 80GG is unexpected if you are in the possession of any self-occupied property.
Amount of tax exemption under section 80 GG
There is a certain limit fixed by the income tax department to benefit the employee:
- Annually ₹ 60000 (₹ 5000/month) exemption amount is allowed to avail the benefit. or
- 25% of the total income of the employee, after all, adjustments (80C to 80 G).
- An amount equal to the total rent paid minus (10% of the total income).
The amount comes out the least from the above three example should be claimed for tax exemption u/s 80 GG.
Understand with the help of an example – Declaration under section 80GG
Let’s take an example:
Mr. Raj received an annual salary of ₹ 400000, he pays an annual rent of ₹ 150000.
After putting this example in the above scenario, the tax deduction allowed to him would be:
- ₹ 5000 per month (₹ 60000 annually), this is fixed if you go through it.
- 25% of total income (25% of ₹ 400000) i.e. ₹ 100000.
- Actual rent paid ₹ 150000 (₹ 150000 – 10% of ₹ 400000 (Total income) i.e. ₹ 40000 = ₹ 110000).
The amount comes out the least from the above three example should be claimed for tax exemption u/s 80 GG. From the above example, Mr. Raj can claim ₹ 60000 annually u/s 80GG.
Documents required u/s 80GG
- An employee needs to furnish a rent agreement along with rent receipt monthly.
- It is mandatory to fill Form 10 BA to claim tax deduction u/s 80GG.
Income tax department provides the option to fill Form 10 BA online through their website.
After selecting “Income tax forms” you will get the option of form selection, which brings you to the list of the form:
After selecting the form and inserting assessment years along with submission mode Click continue:
You will get “Form 10 BA” – Declaration to be filled by the assessee claiming deduction under section 80GG.
This form is very clear to understand and after filling the form just click submit to complete the process of claiming tax deduction u/s 80GG.
After submission of this form, you can insert the amount in the portion of Part D “80GG” in your ITR Form.
Form 10ba is mandatory to proves that the employee is not claiming any benefit of the self-occupied property where he is employed.