Deduction u/s 80GG of Income Tax Act, 1961

If you are living in a rented house, the rent paid may help you save your income tax. Section 8GG of Income Tax Act provides deduction for House rent paid from the Gross Total Income subject to certain conditions. Section 80GG was omitted by the Finance Act 1997 w.e.f 1998-99, but it was restored again by Finance (No 2) Act, 1998 with retrospective effect i.e A.Y 1998-99.

Herebelow some important points relating to deduction under section 80GG are provided.

Quantum of deduction: The deduction u/s 80GG shall be available as minimum of the following amounts:

(i) Excess of rent paid over 10% of Adjusted Total Income
(ii) 25% of the Adjusted Total Income
(iii) Rs. 2000 per month

Adjusted Total Income means Gross Total Income as reduced by the following:
(i) Long Term Capital Gains if any, which have been included in the Gross Total Income
(ii) Short term Capital Gains referred to in section 111A(i.e STCG on transfer of shares sold in recognised stock exchange, taxable @ 15%)
(iii) all deductions permissible u/s 80C to 80U except the deduction under this section i.e u/s 80GG
(iv) Income referred to in section 115A, 115AB, 115AC, or 115AD(i.e incomes of NRIs and foreign companies etc, taxable at special rate of tax)

Essential conditions for deduction:
(1) This deduction is available to an Individual only.

(2) The individual should pay rent for his residential accomodation, whether furnished or unfurnished

(3) The Individual should not be in reciept of any HRA or rent free accomodation

(4) The Individual, his or her spouce or ninor child or  a HUF of which he/she is a member, doesnot own any residential accomodation at the place of where such individual ordinarily resides or at a place where he works or carries on his business or profession.

If such individual owns any residential accomodation at any place other than the place of his residence or work, then such property should not be assessed in his hands as self occupied property

(5) The accomodation for which rent is paid must be situated in any of the following places namely- Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Calicut, Chennai, Coimbatore, Cochin, Delhi, Faridabad, Gwalior, Ghaziabad, Hyderabad, Hubli-Dharwar, Indore, Jabalpur, Jaipur, Kanpur, Lucknow, Ludhiana, Madurai, Mumbai, Nagpur, Patna, Srinagar, Surat, Sholapur, Vadodara, Varanasi, Trivendrum, Vishakhapatnam.

(6) A declaration in form No 10BA has to be filed by the assessee as per CBDT notification No. S.O. 902(E) dt. 13-10-1998.

(7) Such Individual should fulfill such other conditions or limitations as may be prescribed, having regard to the area or place in which such accomodation is situated and other relevant considerations.


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