🏡 Renting Without HRA? Section 80GG is Your Tax Lifeline! ✨

Individuals who pay rent for their residential accommodation but don’t receive House Rent Allowance (HRA) as part of their salary might feel they’re missing out on a common tax benefit. But don’t worry! The Income Tax Act, 1961, extends a helping hand to such individuals through Section 80GG, allowing a deduction for the rent paid, subject to specific conditions and limits. Understanding Section 80GG is crucial for both salaried and self-employed individuals who are footing their rent bills but aren’t eligible for HRA exemption under Section 10(13A). It’s your path to unlocking valuable tax relief!

What Exactly is Section 80GG? (The Core Idea)

Section 80GG offers a direct deduction from the Gross Total Income (GTI) of an individual for the rent they’ve paid for residential accommodation.

Let’s quickly define the key terms:

• Gross Total Income (GTI): This is your total income from all sources (Salaries, House Property, Business/Profession, Capital Gains, Other Sources) after setting off any eligible losses.
• Deduction: An amount that gets subtracted from your GTI, ultimately leading to your Total Taxable Income – the figure on which your final tax is calculated.
• Chapter VI-A: This is the section in the Income Tax Act (Sections 80C to 80U) that lists various deductions available from your Gross Total Income.

The main aim of Section 80GG is to provide tax relief for rent payments to individuals who don’t benefit from HRA, bringing some fairness compared to salaried employees who get HRA exemption.

Who Can Claim Section 80GG Deduction? 👤

A very important point: The deduction under Section 80GG can ONLY be claimed by Individuals.

• Individual: This refers to a natural person.
• Assessee: In this context, it’s the individual by whom tax is payable.

This deduction is NOT available to Hindu Undivided Families (HUFs), companies, firms, LLPs, or any other type of assessee. Both salaried and self-employed individuals can be eligible, as long as they meet the specific conditions.

Key Conditions for Claiming Section 80GG: Your Eligibility Checklist ✅

Eligibility for Section 80GG comes with a set of stringent rules. Make sure you tick all these boxes:

• No House Rent Allowance (HRA): You (the assessee) must not have received any HRA from your employer at any point during the entire previous year (PY 2024-25) for which you’re claiming the deduction.
• No Self-Owned Accommodation in Relevant Location: Neither you, your spouse, nor your minor child should own any residential accommodation in the city where you ordinarily reside or conduct your business or profession.
• No Self-Owned Accommodation Treated as SOP/Deemed LOP Elsewhere: If you own residential accommodation in any place other than where you reside or carry on business/profession, you cannot claim the deduction under Section 80GG if that property is treated as a Self-Occupied Property (SOP) or is considered as a ‘deemed to be let out’ property under Section 23 of the Income Tax Act.
• Payment of Rent: You must have genuinely paid rent for the residential accommodation you occupy for your own residence.
• Declaration in Form 10BA: You must file a declaration in Form 10BA (more details below).

What Payments Are Eligible Under Section 80GG?

The only payment that qualifies for deduction under this section is the actual amount of rent paid by you for the residential accommodation you occupy for your own residence during the previous year (PY 2024-25).

Calculating the Deduction Limit Under Section 80GG: The “Least Of” Rule 🔢

If all eligibility conditions are met, the deduction allowed under Section 80GG is the least of the following three amounts:

1. Actual rent paid during the previous year minus 10% of the Adjusted Total Income of the assessee.
2. 25% of the Adjusted Total Income of the assessee.
3. A fixed amount of ₹5,000 per month, which aggregates to ₹60,000 per annum.

Explanation of Adjusted Total Income for Section 80GG:

The ‘Adjusted Total Income’ for calculating the limit under Section 80GG has a specific definition different from other sections (like 80G). For Section 80GG, Adjusted Total Income is calculated as:

Gross Total Income (GTI)−Long-term Capital Gains (LTCG)−Short-term Capital Gains (STCG) taxable under Section 111A−Deductions under Sections 80C to 80U (excluding 80GG and 80JJAA)−Any income referred to in Section 115A, 115AB, 115AC, etc., taxed at special rates

In simpler terms, it’s roughly your GTI reduced by certain capital gains and most Chapter VI-A deductions (but notably, not the 80GG deduction itself or 80JJAA).

Mandatory Requirement to File Form 10BA 📄

A critical compliance step for claiming deduction under Section 80GG is the electronic filing of a declaration in Form 10BA.

• This form must be filed electronically before you submit your Income Tax Return.
• It requires key details such as: your name and address, the full address of the rented accommodation, the name and address of the landlord, the period of occupation during the previous year, and the total amount of rent paid.
• Crucially: If your annual rent paid exceeds ₹1,00,000, you must also provide the Permanent Account Number (PAN) of your landlord.

Claiming the deduction without filing Form 10BA will result in the deduction being disallowed.

Proof of Rent Payment: Keep Your Records! 🗄️

While you don’t need to attach rent receipts with your ITR or Form 10BA, it is mandatory to maintain proof of rent payment. This includes: rent receipts signed by the landlord, bank statements reflecting online transfers to the landlord. You must be able to produce these proofs if requested by the Assessing Officer during assessment proceedings.

How to Claim Section 80GG Deduction: Step-by-Step

1. Verify Eligibility: Double-check that you meet all the key eligibility conditions (No HRA, no property ownership issues, and you’ve actually paid rent).
2. Calculate Adjusted Total Income (ATI): Work out your ‘Adjusted Total Income’ specifically for Section 80GG, as defined above.
3. Determine Allowable Deduction: Apply the ‘least of three’ rule to calculate the final deductible amount.
4. File Form 10BA: Fill out and submit Form 10BA electronically (via the Income Tax portal) before submitting your Income Tax Return.
5. Claim in ITR: Enter the calculated deduction amount under Section 80GG in the designated field in your annual Income Tax Return (ITR).

Examples: Understanding the Calculations

Example 1: Calculation Where Rent Paid Minus 10% ATI is the Lowest

Mr. Sunil (Age 35, salaried, received no HRA) pays rent of ₹8,000 per month (₹96,000 per annum) in a city where he does not own property. His GTI is ₹7,00,000. His deductions under 80C-80U (excluding 80GG) total ₹1,00,000. No LTCG/STCG/special income.

• Adjusted Total Income (ATI) = GTI – Other Chapter VI-A Deductions = ₹7,00,000 – ₹1,00,000 = ₹6,00,000.
• Rent Paid = ₹96,000.

Least of:

1. Rent paid – 10% of ATI = ₹96,000 – (10% of ₹6,00,000 = ₹60,000) = ₹36,000.
2. 25% of ATI = 25% of ₹6,00,000 = ₹1,50,000.
3. Fixed Limit = ₹60,000 per annum.

The least of ₹36,000, ₹1,50,000, and ₹60,000 is ₹36,000. Mr. Sunil’s Deduction under Section 80GG = ₹36,000. (He must also file Form 10BA).

Example 2: Calculation Where Fixed Limit is the Lowest (Corrected Title)

Ms. Anita (Age 40, self-employed) pays rent of ₹5,000 per month (₹60,000 per annum). Her GTI is ₹5,00,000. Her deductions under 80C-80U (excluding 80GG) total ₹80,000. No LTCG/STCG/special income. She meets all eligibility conditions.

• Adjusted Total Income (ATI) = GTI – Other Chapter VI-A Deductions = ₹5,00,000 – ₹80,000 = ₹4,20,000.
• Rent Paid = ₹60,000.

Least of:

1. Rent paid – 10% of ATI = ₹60,000 – (10% of ₹4,20,000 = ₹42,000) = ₹18,000.
2. 25% of ATI = 25% of ₹4,20,000 = ₹1,05,000.
3. Fixed Limit = ₹60,000 per annum.

The least of ₹18,000, ₹1,05,000, and ₹60,000 is ₹18,000. Ms. Anita’s Deduction under Section 80GG = ₹18,000. (She must also file Form 10BA).

Example 3: Calculation Where No Deduction is Available

Mr. Ravi (Age 50, self-employed) pays very low rent of ₹1,000 per month (₹12,000 per annum). His GTI is ₹8,00,000. His deductions under 80C-80U (excluding 80GG) total ₹1,50,000. No LTCG/STCG/special income. He meets all eligibility conditions.

• Adjusted Total Income (ATI) = GTI – Other Chapter VI-A Deductions = ₹8,00,000 – ₹1,50,000 = ₹6,50,000.
• Rent Paid = ₹12,000.

Least of:

1. Rent paid – 10% of ATI = ₹12,000 – (10% of ₹6,50,000 = ₹65,000). This value is negative, so it is considered as ₹0.
2. 25% of ATI = 25% of ₹6,50,000 = ₹1,62,500.
3. Fixed Limit = ₹60,000 per annum.

The least of ₹0, ₹1,62,500, and ₹60,000 is ₹0. Mr. Ravi’s Deduction under Section 80GG = ₹0. (Despite paying rent, his low rent relative to income means no deduction is available).

Important Points to Remember about Section 80GG

Conclusion

Section 80GG provides essential tax relief to individuals who pay rent but do not receive HRA, aiming to provide a degree of parity in tax benefits for housing costs. However, claiming this deduction requires strict adherence to the eligibility conditions (especially no HRA and no relevant property ownership), a correct calculation based on the ‘least of three’ rule involving Adjusted Total Income, and the mandatory filing of Form 10BA.

Crucially, this deduction is not available if you opt for the default New Tax Regime (Section 115BAC) from AY 2025-26 onwards.

For accurate tax planning and computation, particularly concerning the eligibility conditions and the ‘least of three’ calculation, consulting a qualified tax professional is strongly recommended.