How to Report Rent Paid Without HRA and Still Claim Deduction Under Section 80GG
- Farheen Mukadam
- Aug 11
- 10 min read
Section 80GG of the Income Tax Act provides a tax deduction for individuals who pay rent but do not receive a house rent allowance (HRA) from their employer. This section is particularly beneficial for self-employed individuals, freelancers, or those working in organizations that do not offer HRA as part of their compensation package. If you are in a situation where you pay rent for your accommodation and do not receive any HRA, Section 80GG allows you to claim a deduction for the rent you pay, subject to certain conditions. This can help reduce your overall taxable income and, in turn, lower your tax liability.
Table of Contents
What is Section 80GG and Who Can Claim It?
Section 80GG offers a tax deduction on rent payments made by an individual, provided certain criteria are met. The deduction is applicable to individuals who are not receiving any house rent allowance (HRA) as part of their salary package. Unlike HRA, which is typically available to salaried employees, Section 80GG is intended for individuals who pay rent but do not benefit from HRA. To claim this deduction, the taxpayer must meet specific conditions:
The individual must be living in a rented property and paying rent.
The person must not be receiving any HRA from their employer.
The person must be an individual taxpayer (self-employed, salaried, or a pensioner).
The rented property should not be in the name of the taxpayer's spouse, minor child, or Hindu Undivided Family (HUF).
This section is especially useful for those who live in rented accommodations but are not eligible to claim HRA.
Step-by-Step Process to Claim Deduction Under Section 80GG
Claiming a deduction under Section 80GG is relatively simple, but there are a few steps that must be followed to ensure the process is done correctly:
Determine Eligibility: Before applying for the deduction, ensure that you meet the conditions required by Section 80GG. You should be paying rent, not receiving HRA, and not living in a house owned by you or a family member.
Calculate Rent Paid: Calculate the amount of rent you pay monthly or annually for the accommodation.
Fill Form 10BA: To claim the deduction, the taxpayer must furnish a declaration in Form 10BA. This form contains details of the rent paid and the address of the rented property. The form also includes a statement that the taxpayer is not receiving HRA.
Submit Supporting Documents: The taxpayer must submit documents such as the rent receipts and a copy of the rental agreement (if available). These documents act as proof of the rent payments and the eligibility for claiming the deduction.
Claim Deduction: Once the Form 10BA is filled out and the supporting documents are in place, the taxpayer can claim the deduction under Section 80GG in the Income Tax Return (ITR) form.
How to Calculate the Deduction You Can Claim
The amount of deduction under Section 80GG is the least of the following:
Rent Paid minus 10% of Total Income: This is the most common method. The amount is calculated by taking the rent you pay and subtracting 10% of your total income (excluding long-term capital gains, short-term capital gains, and income under Section 80C to 80U).
Rs. 5,000 per month: This is a fixed upper limit for the deduction. If your rent exceeds this amount, only Rs. 5,000 per month will be considered.
25% of Total Income: The total rent paid can also be limited to 25% of your total income (excluding specific exclusions mentioned earlier).
To determine your deduction, calculate each of the three figures and choose the least amount as the deduction under Section 80GG.
Example Calculation of Rent Deduction
Let’s consider an example to understand how to calculate the deduction under Section 80GG:
Monthly rent paid: Rs. 12,000
Total income (excluding specific exclusions): Rs. 60,000 per month
Now, let’s apply the formula:
Rent paid minus 10% of total income = 12,000 - (10% of 60,000) = 12,000 - 6,000 = Rs. 6,000
Fixed deduction limit of Rs. 5,000
25% of total income = 25% of 60,000 = Rs. 15,000
The least amount here is Rs. 5,000, so this is the deduction the taxpayer can claim under Section 80GG.
Key Points to Remember While Claiming Section 80GG
Section 80GG of the Income Tax Act allows taxpayers to claim a deduction on rent paid for residential accommodation. This provision is available for individuals who do not receive House Rent Allowance (HRA) from their employer, but there are several important conditions and documentation requirements that must be met to qualify for this deduction. Here is a detailed look at the key points to remember when claiming Section 80GG:
1. Form 10BA: It is Mandatory to Submit Form 10BA for Claiming a Deduction under Section 80GG
To claim the deduction under Section 80GG, taxpayers must submit Form 10BA. This form serves as a declaration that the individual is paying rent for a residential property, which is not owned by them or their close relatives. The form requires details such as the amount of rent paid, the address of the rented property, and the relationship between the taxpayer and the landlord. It must be signed by the taxpayer and submitted along with the ITR for the respective financial year. If this form is not submitted, the taxpayer will not be eligible to claim the deduction under Section 80GG.
2. Rent Receipts: Ensure that Rent Receipts are Available, and Ideally, the Rental Agreement Should Be Provided as Proof
One of the key requirements for claiming Section 80GG is proof of rent payments. The taxpayer should have rent receipts that indicate the amount paid every month. Ideally, these receipts should be signed by the landlord. Along with rent receipts, it is recommended to provide a rental agreement as additional proof, which should include details like the rental amount, the terms of the agreement, and the landlord’s details. These documents are essential for substantiating the claim and ensuring there are no discrepancies during assessment.
Additionally, some taxpayers might face difficulties in obtaining signed receipts from their landlord, particularly in informal rental arrangements. In such cases, it is advisable to ensure that rent payments are made through bank transfers or cheques, which will serve as additional evidence in case of scrutiny by tax authorities.
3. No HRA: This Deduction is Only Available to Individuals Who Do Not Receive HRA from Their Employer
Section 80GG is specifically designed for individuals who do not receive House Rent Allowance (HRA) from their employer. If an individual is already receiving HRA as part of their salary package, they cannot claim this deduction. HRA is an allowance provided by the employer to cover the rent expenses of the employee, and it is already eligible for a tax deduction under Section 10(13A).
However, for taxpayers who do not receive HRA, Section 80GG offers a valuable alternative by allowing them to claim a deduction for rent paid. It is important to confirm that HRA is not being received, as it would disqualify the taxpayer from claiming this deduction.
4. Limitations on Rent Paid: The Deduction is Limited to Rs. 5,000 per Month, or a Percentage of Total Income, Whichever Is Lower
There are specific limits on the amount of rent that can be claimed as a deduction under Section 80GG. The amount of deduction is limited to Rs. 5,000 per month or a percentage of the taxpayer’s total income, whichever is lower. The percentage is determined as follows:
25% of the total income of the taxpayer, or
Rs. 5,000 per month, whichever is lower.
For example, if the total income of the taxpayer is Rs. 3,00,000 per year (Rs. 25,000 per month), then 25% of the total income would be Rs. 7,500 per month. However, the deduction would be limited to Rs. 5,000 per month, which is the maximum allowed under the section.
Thus, while the maximum rent deduction is capped at Rs. 5,000 per month, it ensures that individuals living in less expensive rental arrangements can still benefit from this provision.
5. Eligibility for Family Members: If the Taxpayer Lives in a House Owned by a Family Member, They Cannot Claim This Deduction
An important condition for claiming a deduction under Section 80GG is that the taxpayer must be renting a property that is not owned by themselves, their spouse, minor child, or Hindu Undivided Family (HUF). If the taxpayer is living in a property that is owned by a family member, they cannot claim this deduction. This rule is in place to prevent individuals from claiming tax benefits for rent paid to relatives in cases where the arrangement is not a genuine rental agreement.
The deduction is meant to apply only when the taxpayer rents a property from an unrelated third party. Therefore, if the property is owned by the taxpayer’s family members, they would not be eligible to claim the Section 80GG deduction.
6. Property Ownership: The Property Should Not Be Owned by the Taxpayer, Spouse, Minor Child, or Hindu Undivided Family (HUF)
The key requirement under Section 80GG is that the property being rented must not be owned by the taxpayer or any of their close relatives, including their spouse, minor children, or HUF (Hindu Undivided Family). If the taxpayer resides in a house owned by themselves or any of these family members, they cannot claim the deduction for the rent paid, even if they are paying rent.
This provision is designed to ensure that taxpayers cannot claim deductions on rent they pay to family members for properties they already own. The aim is to prevent abuse of the system, ensuring that only genuine rent payments made to unrelated landlords are eligible for tax relief under Section 80GG.
Is Section 80GG Available Under the New Tax Regime?
Section 80GG is not available under the new tax regime. The new tax regime, introduced in Budget 2020, offers lower tax rates but removes most deductions, exemptions, and rebates, including Section 80GG. Taxpayers who opt for the new tax regime cannot claim deductions like HRA, 80C, or 80GG. Therefore, if you want to claim a rent deduction under Section 80GG, you must opt for the old tax regime. You must evaluate your eligibility for both tax regimes before deciding which one is more beneficial, considering the deductions you can claim.
Conclusion
Section 80GG provides an excellent opportunity for individuals who do not receive House Rent Allowance (HRA) but pay rent to claim a tax deduction. Whether you are self-employed, a freelancer, or a salaried employee without HRA, this section can help reduce your taxable income. By following the correct steps, ensuring all documentation is in place, and understanding the limits on deductions, you can effectively use this section to lower your tax liability. However, it’s important to remember that the deduction is not available under the new tax regime, so taxpayers must evaluate their options carefully before filing their returns. To streamline the process and ensure accurate filing, you can rely on TaxBuddy’s AI-driven platform. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: Who is eligible to claim the Section 80GG deduction?
To claim the Section 80GG deduction, you must be an individual who is paying rent for accommodation and not receiving House Rent Allowance (HRA) as part of your salary. This deduction is primarily for self-employed individuals, freelancers, or salaried individuals who do not get HRA but are still paying rent for their accommodation.
Q2: Can I claim Section 80GG if I own the rented property?
No, Section 80GG does not allow you to claim a deduction if you own the property that you are renting. The property must not be owned by you or any of your family members (spouse, minor children, etc.). Only rent paid for accommodation you do not own is eligible for deduction under Section 80GG.
Q3: Can I claim the deduction under Section 80GG if I live in a house owned by my parents?
No, you cannot claim the Section 80GG deduction if you are living in a house owned by your parents or any other family member. The deduction is meant for those who pay rent for accommodation that is not owned by them or their close relatives.
Q4: How do I calculate the rent deduction under Section 80GG?
The amount of the deduction is the least of the following:
Rent paid minus 10% of your total income.
Rs. 5,000 per month.
25% of your total income.
So, whichever amount is the smallest from these three options will be the deduction you can claim.
Q5: What is Form 10BA?
Form 10BA is a declaration form that must be filed by individuals who wish to claim a deduction under Section 80GG. The form requires you to declare the amount of rent you are paying and confirm that you are not receiving any HRA. This form helps the tax department verify your rent claim.
Q6: Can I claim Section 80GG under the new tax regime?
No, Section 80GG is not available under the new tax regime. The new tax regime, which offers lower tax rates, does not allow any exemptions or deductions, including the one under Section 80GG. Therefore, if you opt for the new tax regime, you cannot claim this deduction.
Q7: How much rent can I claim for Section 80GG?
The maximum rent you can claim under Section 80GG is Rs. 5,000 per month. However, if the rent paid exceeds this amount, the deduction is calculated based on the lower of the following:
Rent paid minus 10% of your total income.
Rs. 5,000 per month.
25% of your total income.
Thus, the maximum you can claim is Rs. 5,000 per month, but it may vary based on your total income and the rent you are paying.
Q8: Do I need a rental agreement to claim Section 80GG?
While having a rental agreement is not mandatory for claiming the Section 80GG deduction, it is highly recommended as proof of rent payment. A rental agreement helps substantiate your claim in case of an audit by the tax authorities. It’s always advisable to keep proper documentation of rent payments.
Q9: Is there a maximum limit to claim under Section 80GG?
Yes, the maximum limit for claiming the deduction under Section 80GG is Rs. 5,000 per month. However, as stated earlier, if the rent paid exceeds this amount, the deduction will be calculated based on the least of three conditions, and Rs. 5,000 is the upper limit.
Q10: Can I claim a deduction for rent paid for both my office and residential accommodation under Section 80GG?
No, Section 80GG applies only to rent paid for residential accommodation. Rent paid for office space or any other non-residential purpose cannot be claimed under this section. If you're paying rent for both office and residential accommodation, you can only claim the deduction for the residential accommodation under Section 80GG.
Q11: Can I claim Section 80GG if I live in a shared accommodation?
Yes, if you are paying rent for a shared accommodation, you can still claim the deduction under Section 80GG, provided you meet the other eligibility conditions. The rent you pay, even in a shared setting, is eligible for the deduction as long as it is for accommodation that is not owned by you or your family.
Q12: Is there any specific documentation required to claim Section 80GG?
To claim the Section 80GG deduction, you will need to submit Form 10BA, which declares the rent paid and confirms that you are not receiving HRA. Additionally, maintaining rent receipts or bank statements to show that rent is paid is essential for verification purposes. While a rental agreement is not mandatory, it is highly advisable to have one for substantiation during tax assessments.
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