Tax deduction can be availed on house rent paid for furnished or unfurnished accommodation even though you are not getting HRA or House Rent Allowance is not part of your salary. This tax deduction is available to taxpayers under section 80GG of income tax act 1961.
If you are getting House rent allowance or HRA from your employer, instead of taking tax benefits under section 80GG, you have to go for section 10 (13A) to claim exemption from HRA received.
In this article we will be discussing how to claim tax deduction on your house rent under section 80GG.
If you are interested to know tax deduction provisions for house rent paid under section 10(13A), read our earlier article of HRA exemption.
To claim tax deduction on house rent under section 80GG, you are required to satisfy following conditions;
- You are either self-employer or salaried individual not getting HRA.
- You have not received HRA at any time during the financial year for which this tax deduction claim is made.
- Taxpayer or his/her spouse, minor child or HUF does not own any residential accommodation at the place where he/she currently reside or perform duties or carry on business or profession.
- Taxpayer has not claimed deduction for residential property at any place as a self-occupied property.
Tax Deduction Limit under Section 80GG
Lowest of the following will be considered as tax deduction under section 80GG of income tax act 1961:-
- 5000 per month, or
- Rent paid in excess of 10% of adjusted total income, or
- 25% of adjusted total income
Adjusted total income for the purpose of section 80GG as mentioned above means the Gross total income minus long term capital gain if any minus short term capital gain minus all permissible deduction under section 80C to 80U except deduction under section 80GG minus income referred to in section 115A, 115AB, 115AC or 115AD.
|Calculation of adjusted total income|
|Particulars||Amount in Rupees|
|Gross total income||XXXX|
|1||Long term capital gain||(XXXX)|
|2||Short term capital gain||(XXXX)|
|3||All other tax deduction under chapter VI-A except 80GG||(XXXX)|
|4||Any income referred u/s 115A to 115D||(XXXX)|
|Adjusted Total Income||XXXX|
In case of tax exemption under 10(13A), HRA exemption is to be calculated based on the city of living. Like in case of metro cities, you are eligible for a higher tax exemption in comparison of non-metro cities.
But, tax deduction under section 80GG is not based on the city of living. Deduction for house rent paid under section 80GG has to be claimed irrespective of your city of living.
To claim tax deduction under section 80GG, you must file a declaration in form no 10BA by confirming that you have paid house rent and fulfilled all the conditions as specified under section 80GG to claim tax deduction.
To file form 10BA, you are required to log-in into your income tax account and then under prepare and submit online form you have option to prepare and file form 10BA. You can prepare the form online and file it. You are required to provide following details while filing form 10BA;
- Full address of the premises
- Amount paid as rent
- Name and address of the landlord
Example: How to calculate tax deduction u/s 80GG for payment of house rent
Mr A’s total income for the financial year 2018-2019 after all deductions is Rs 4,00,000 and he pays annual rent of Rs 2,50,000. In this case deduction will be the least of following;
- 60,000 (i.e. Rs 5000*12)
- 2, 10,000 (Rs 250000-10% of Rs 400000)
- 1, 00,000 (25% of Rs 400000)
Mr A can claim tax deduction of Rs 1, 00,000 under section 80GG for the financial year 2018-19.