Reduce your tax burden with the Income Tax Act, 1961. Use investments and expenses, like rent, for tax benefits under section 80GG.

What is Section 80GG of the Income Tax Act?

According to Section 80GG of the Income Tax Act, the rent paid for your residential house can be deducted from your total income. This reduces your total taxable income and lowers your overall tax liability. This deduction is available to both salaried and self-employed individuals, so regardless of how you earn your income, you can use this provision to decrease your tax liability.

Deduction Limits Under Section 80GG of the Income Tax Act

According to the Income Tax Act, you can deduct the least of the following amounts from your total income if you are eligible for the benefit:

• Rs. 5,000 per month (i.e. Rs. 60,000 per annum)
• 25% of your total adjusted income (i.e. total income excluding capital gains, income u/s 115A and 115D and deductions u/s 80C to 80U)
• Actual rent paid during the year minus 10% of your income

Who is Eligible for Deductions Under Section 80GG?

The Income Tax Act specifies the criteria for eligibility under section 80GG. You can claim the benefit offered by this section if:

• You have not received any house rent allowance (HRA) from your employer during the year
• You (and your spouse/child/HUF) do not own any residential property in the city when you reside in or work
• You must have some income during the year (either from a salaried job or a from a business where you are self-employed)
• You should not have received HRA benefits from your previous employer (if you changed jobs during the year)
• You have a formal rental agreement with your parents if you are residing as a tenant in a property owned by them

In addition to the above criteria, there are also some other important exemptions and conditions that you should be aware of. They include the following:

• You should not own any residential property for which you are claiming the benefits of a self-occupied property under the Income Tax Act
• If the rent exceeds Rs. 1 lakh per annum, you must submit the PAN of the property owner
• You must fill and submit Form 10BA to the Income Tax Department

Get Tax Savings and More Benefits on the Rent Paid

While section 80GG of the Income Tax Act offers you the advantage of tax savings on the rent paid during the year, there are many other benefits too that you can tap into, thanks to this recurring expense. One such benefit is that you can earn reward points on the rent paid with the right credit card.

Get a Credit Card That’s Tailor-Made For You

If you're looking for a credit card that gives you the best bang for your buck, try the Fi-Federal Credit Card. This might just be what you need. With this card, you're assured of a 2% valueback through rewards. But that's not all, as you'll also get 5x on your top 3 brands, 2x on all partner brands, and 1x on everything else, including rent and fuel. But that's just the tip of the iceberg, as you'll also enjoy airport lounge access, 1% forex, the freedom to choose your own billing cycle, and personalised reminders.

Frequently Asked Questions

1. What is section 80GG of the Income Tax Act, and how does it benefit taxpayers in India?

Section 80GG of the Income Tax Act provides relief for the rent paid by taxpayers. It offers the benefit of tax deduction, which reduces the total taxable income and the tax liability.

2. Explain the eligibility criteria for claiming tax deductions under section 80GG?

You will be eligible to claim deductions under section 80GG of the Income Tax Act if you do not receive any HRA and do not own a residential property in the city you reside in.

3. How does section 80GG differ from other tax-saving sections, such as section 80C and section 80D?

Section 80C primarily offers tax benefits up to Rs. 1.5 lakhs for specific investments and expenses, while section 80D offers tax deductions for the health insurance premium paid during the year. On the other hand, section 80GG gives tax benefits on the annual rent paid by the taxpayer.

4. Are there any specific limits or restrictions on the amount of tax deduction that can be claimed under section 80GG?

Yes, you can claim the least of the following amounts as a deduction under section 80GG of the Income Tax Act: Rs. 60,000 per year, or 25% of your adjusted annual income, or actual rent minus 10% of your adjusted annual income.

5. Can you provide examples where taxpayers might utilise section 80GG for tax deductions related to rent payments?

Yes, a taxpayer who may not be receiving house rent allowance (HRA) from their employer, but is residing in a rental property in their city of work could use section 80GG to reduce their tax liability.