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80GG- Deduction on rent paid if no HRA is received
[Updated as on Dec 31, 2019]
Deduction on expenditure incurred by an assessee towards payment of rent shall be allowed under Section 80GG to the extent given below if the assessee fulfils the following conditions:
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Assessee is not in receipt of House Rent Allowance or any other allowance specifically granted for meeting expenditure towards rent.
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Residential accommodation is not owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession.
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Even if any residential accommodation is owned by the assessee at any other place, it is not in the occupation of the assessee, the annual value of which shall be deemed to be "Nil" under Section 23(2)(a) or 23(4)(a) of Income Tax Act.
Amount of deduction
The amount of deduction allowable shall be lower of the following:
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Rent payment in excess of 10 percent of his total income in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence.
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Rs.5000 per month.
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25 percent of his total income for the year
For the above purpose, “total income” shall mean assessee's total income computed before allowing deduction for any expenditure under this section.
Assessee to file declaration in Form No.10BA for claiming deduction
Rule 11B of the Income Tax Rules prescribes that deduction under Section 80GG shall be allowed subject to the condition that the assessee files the declaration in Form No. 10BA . The format of Form No.10BA is as given under.
Illustrations on deduction under Section 80GG
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Raju is drawing salary of Rs.80000 per month which includes Rs.10000 towards HRA. Whether he is eligible for deduction under Sec.80GG?
Deduction under section 80GG is allowable only to assessee who are not in receipt of HRA or other similar allowance. Deduction on HRA received can be claimed under Sec.10(13A).
2. Mohan is running a shop in Delhi and resides in a rented apartment paying a rent of Rs.12000 per month. His wife owns a house in Gurgaon which is let out. His total income during the year was Rs.550000 and he has paid Rs.80000 towards LIC premium during the year. Whether Mohan can claim deduction under Sec.80GG?
Mohan can claim deduction under the section as he or his spouse does not own any house in Delhi where he is residing or carrying on his business or profession.
Computation of eligible deduction:
A. Rs.12000 X 12-(10% X 470000) = Rs.97000
B. Rs.5000 X 12 = Rs.60000
C. 25% X Rs.470000 = Rs.117500
Total income for above purpose = Rs.470000 [Rs.550000 less deduction u/s 80C i.e Rs.80000]
Deduction eligible under Section 80GG is lower of A, B & C which is Rs.60000
3. Suresh, an Advocate practices in Mumbai and lives in a rented apartment. He also owns a house in Pune for which he declares ‘Nil’ Annual value under income from house property in his return. He claims deduction under Sec 80GG in respect of rent of Rs.15000 paid for the apartment in Mumbai. Whether he is eligible to claim the deduction under Section 80GG?
Suresh is not eligible to claim deduction under Section 80GG since he owns a house at another place and claims the benefit of ‘nil’ annual value under Section 23(2)(a) of income tax act applicable for self-occupied property.
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