How to Report Rent Payments Without HRA in Your Tax Filing and Avoid Tax Notices
- Rashmita Choudhary
- Jul 10
- 8 min read
Section 80GG of the Income Tax Act provides an opportunity for taxpayers to claim a deduction on rent paid, even if they do not receive a House Rent Allowance (HRA) from their employer. This section offers a valuable tax benefit for individuals who live in rented accommodations but do not have HRA as part of their salary package. The deduction allows you to reduce your taxable income, thereby lowering the amount of tax you owe. However, like all tax-related provisions, there are specific rules, eligibility criteria, and documentation requirements that need to be met to successfully claim this deduction. Let us explore the details of Section 80GG, the documentation required, and a step-by-step guide process on how to claim this deduction when filing your Income Tax Return (ITR).
Table of Contents
Understanding Section 80GG: Claiming Rent Paid Without HRA
Section 80GG of the Income Tax Act is designed to provide relief to individuals who pay rent for accommodation but do not receive HRA. This deduction is available to both salaried and self-employed individuals, provided they meet certain conditions:
Eligibility Criteria: To claim the deduction under Section 80GG, the taxpayer must not be in receipt of HRA. This means that individuals who receive HRA as part of their salary package are not eligible to claim under this section.
Amount of Deduction: The deduction amount under Section 80GG is limited to the least of the following:
₹5,000 per month (or ₹60,000 per year) for rent payments,
25% of total income (excluding capital gains, income from lottery, etc.),
Rent paid minus 10% of total income.
The deduction is available for rent paid for any accommodation (house, flat, etc.) where the taxpayer or their family resides. This section is especially beneficial for those working in locations where housing costs are high but who do not receive HRA.
Documentation Required for Rent Deduction Claims
To claim the deduction under Section 80GG, taxpayers need to ensure that they have the proper documentation to substantiate their claims. The following documents are essential for filing under this section:
Rent Receipts: Rent receipts from the landlord must be provided to claim the deduction. These receipts should include details such as the landlord’s name, address, PAN (if available), and the amount of rent paid, along with the period for which the rent is being paid.
Rent Agreement: A rental agreement or lease agreement between the taxpayer and the landlord must be submitted. This document should clearly outline the terms of the rental arrangement, including the rent amount, payment frequency, and duration of the lease.
PAN Details of the Landlord: If the annual rent exceeds ₹1,00,000, the taxpayer must provide the landlord’s PAN details. This ensures compliance with Section 194-IB, which requires tax deduction at source (TDS) for rent payments above this threshold.
Form 10BA: This form needs to be filled out by the taxpayer certifying that the rent paid is for the taxpayer's own accommodation and that they have not received any other rent-related benefits.
Having all of these documents in place is crucial to ensure a smooth tax filing process and to avoid any issues with tax authorities.
How to File: Step-by-Step Process for Section 80GG
Filing a claim under Section 80GG requires a straightforward process, but there are specific steps to follow to ensure that all requirements are met. Below is a step-by-step guide to claiming the deduction:
Check Eligibility: First, confirm that you are eligible to claim the deduction under Section 80GG. You must not be receiving HRA and should be paying rent for your own accommodation.
Collect Documentation: Gather all the necessary documents, including rent receipts, the rental agreement, PAN details of the landlord (if applicable), and Form 10BA.
Complete Form 10BA: This form certifies that you have paid rent and that the accommodation is being used by you or your family. This form must be signed and submitted to your tax consultant or uploaded while filing your return.
Calculate the Deduction: Ensure you calculate the deduction based on the least of the three limits: ₹5,000 per month, 25% of total income, or rent paid minus 10% of total income. Choose the appropriate figure that applies to your case.
Fill in the ITR Form: When filing your ITR, fill in the relevant details under Section 80GG. In ITR-1 or ITR-2 forms, there is a specific section where you can enter the amount of rent paid and claim the deduction.
Submit the Return: Once all details are filled in, and the documents are attached, submit your ITR. Ensure that you have entered the correct details for claiming the deduction, as any discrepancy could lead to delays or tax notices.
By following this process, you can successfully claim the rent deduction under Section 80GG while filing your ITR.
Common Mistakes That Trigger Tax Notices
While claiming the Section 80GG deduction can be beneficial, it’s important to avoid common mistakes that could trigger scrutiny from the tax authorities. Some of the mistakes that taxpayers often make include:
Incorrect Documentation: Failing to provide proper rent receipts, a rental agreement, or Form 10BA is one of the most common mistakes. Without the necessary documentation, your claim may be rejected.
Incorrect Rent Calculations: Some taxpayers incorrectly calculate the maximum deductible amount under Section 80GG. Remember that the deduction is capped at ₹5,000 per month, or the least of 25% of total income or rent paid minus 10%.
Missing Landlord’s PAN Details: If your annual rent exceeds ₹1,00,000, you must provide the PAN details of your landlord. Missing this information could trigger a notice from the tax department.
Filing Multiple Claims: Some individuals try to claim both HRA and the Section 80GG deduction for the same rent payments, which is not allowed. This can lead to penalties.
Incorrect Filing of ITR: Not entering the correct details in the ITR form can cause delays in processing or even rejection of the claim. Double-check all entries before submission.
Latest Updates and News on Rent Payments and Tax Filing
The tax landscape surrounding rent payments and tax filing is constantly evolving, and the most recent changes have been aimed at making the process simpler and more transparent. Some of the notable updates include:
Increased Focus on TDS: For rent payments exceeding ₹1,00,000 annually, the tax authorities now require TDS to be deducted at the rate of 5%. This is designed to ensure that rental income is properly reported and taxed.
Digitization of Rent Receipt Filing: Many taxpayers are now allowed to submit rent receipts and related documents digitally when filing their returns, making the process faster and more efficient.
Introduction of New ITR Forms: The introduction of updated ITR forms has made it easier to claim deductions, including those under Section 80GG. The new forms streamline the process, making it less prone to errors and omissions.
These updates ensure greater compliance and offer taxpayers easier ways to claim deductions, reducing the likelihood of tax notices or issues.
Conclusion
Reporting rent payments without HRA requires careful documentation and compliance with Section 80GG. For anyone looking for assistance in tax filing, I highly recommend you download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience. TaxBuddy makes it easier to track rent payments, generate receipts, and ensure all documents are in order, reducing the risk of tax notices.
Frequently Asked Question (FAQs)
Q1. Can I claim rent deduction under Section 80GG if I receive HRA?
No, you cannot claim a deduction under Section 80GG if you are already receiving House Rent Allowance (HRA) as part of your salary. Section 80GG is meant for taxpayers who do not receive HRA but pay rent for residential accommodation. If you are receiving HRA, the deduction should be claimed under Section 10(13A) instead.
Q2. Is a rent agreement mandatory to claim rent deduction?
While a rent agreement is not strictly mandatory, it is highly recommended to strengthen your claim for rent deduction. Having a formal rent agreement helps substantiate your rent payment, especially in the event of a tax scrutiny. It also ensures that both you and your landlord are on the same page regarding the rental terms.
Q3. What if my landlord refuses to provide a PAN or rent receipts?
In case your landlord refuses to provide a PAN or rent receipts, you can still claim the rent deduction, but you need to have alternative proof of payment, such as bank statements showing rent transfers. However, this can increase the risk of a tax notice, and the tax authorities may disallow your claim if you cannot provide proper documentation.
Q4. How do I file Form 10BA?
Form 10BA is required to claim rent deductions under Section 80GG. This form must be filed online through the Income Tax Department's e-filing portal. You will need to provide details of your rented accommodation, rent payment, and landlord's PAN (if applicable). The form must be filed before claiming the deduction in your ITR.
Q5. Can I pay rent in cash and claim the deduction?
Technically, paying rent in cash is not prohibited; however, it is discouraged, especially for amounts over ₹5,000 per receipt. If you make cash payments above ₹5,000, a revenue stamp is required, and the lack of a digital payment trail increases the risk of scrutiny. To avoid complications, it's advisable to make rent payments through bank transfers or cheques, which provide a verifiable record.
Q6. How much is the maximum deduction available under Section 80GG?
The maximum deduction under Section 80GG is ₹60,000 per annum or 25% of your total income, whichever is lower. For senior citizens, the maximum deduction is ₹50,000. To claim the deduction, you must meet the eligibility criteria, including not owning any residential property in the city where you live.
Q7. Do I need to submit proof of rent payment with my ITR?
No, you do not need to submit proof of rent payment with your ITR. However, it is essential to maintain proper documentation such as rent receipts, rent agreements, bank statements, and Form 10BA in case the tax department requests them during the assessment process. Keeping these documents will help substantiate your claim and avoid any complications.
Q8. What happens if I don't file Form 10BA?
If you fail to file Form 10BA, your claim for rent deduction under Section 80GG will be rejected by the Income Tax Department. Form 10BA is necessary to verify your claim for the rent deduction, and without it, your tax filing will be incomplete. Ensure that you file this form online before claiming the deduction.
Q9. Can I claim rent payments if I own another house elsewhere?
Yes, you can still claim rent under Section 80GG even if you own another property elsewhere. However, the property you own must not be classified as self-occupied, and you must meet other conditions under Section 80GG. The rented accommodation should be your primary residence, and you should not be claiming HRA for that period.
Q10. Is the landlord’s PAN required for all rent payments?
The landlord’s PAN is mandatory if your annual rent exceeds ₹1 lakh. If the landlord refuses to provide their PAN, you can still claim the deduction, but this could trigger a higher level of scrutiny, and the deduction may be disallowed if the tax authorities deem it unsubstantiated. It’s advisable to request the landlord’s PAN to avoid potential issues.
Q11. What happens if I claim rent under both HRA and Section 80GG?
You cannot claim both House Rent Allowance (HRA) and rent under Section 80GG for the same period. Claiming both deductions for the same period would lead to the disallowance of one or both deductions. If you are receiving HRA, you should not claim rent under Section 80GG, as it is meant for those not receiving HRA.
Q12. How do I avoid tax notices while claiming rent under Section 80GG?
To avoid tax notices while claiming rent under Section 80GG, ensure that you have all required documentation in place, such as rent receipts, Form 10BA, and proof of rent payment (bank statements, cheque payments). Avoid making rent payments in cash and ensure that your landlord reports the rental income. Having a clear and verifiable paper trail will help substantiate your claim and reduce the risk of scrutiny.
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