Section 80GG: How business owners and freelancers can claim house rent deduction

Income Tax Tax Savings & Deductions
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In the post-covid era, freelancing has grown largely as a career choice. Many of us are even running small businesses, working as contractual employees or have a professional income. For any career prospect, we often consider moving to cities with higher opportunities and hence, we need to stay in a rented accommodation.

While salaried employees benefit from House Rent Allowance (HRA), self-employed individuals and those without HRA can also claim tax deductions under Section 80GG of the Income Tax Act for rent paid on furnished or unfurnished accommodation.

What are the specific conditions to claim this deduction?

The below conditions are required to be fulfilled in order to be able to claim a deduction u/s 80GG.

  • You must have not received HRA from your employer at any time during the year.
  • You, your spouse, minor child or HUF of which you are a member, should not own any residential property where you currently reside and follow your occupation. For example, if you own a house in Delhi but choose to stay in a rented house in the same city, you can’t claim the deduction under section 80GG.
  • You shouldn’t have a residential property at any other place, that you are declaring as a self-occupied property.

How is the deduction calculated?

The amount of deduction allowed will be the least of,

  • Total rent paid less 10% of total income
  • 25% of the total income
  • ₹5,000 per month i.e ₹60,000 annually

Also, it is important to note that, ‘total income’ for this section means ‘Gross total income less all deductions under chapter VI-A (except 80GG).’

Note: Deduction under section 80GG of Income Tax Act cannot be claimed against short-term capital gains u/s 111A, long-term capital gains and income chargeable to tax at special rates.

What is Form 10BA?

Form 10BA is a declaration that has to be filed by an individual who wants to claim a deduction under section 80GG for rent paid.

It is a declaration that you are not claiming the benefit of a self-occupied property on a house in any other location or the same location as you are employed.

You will be required to fill in details like your name, PAN and address along with the rent details.

If you receive HRA as a part of your salary, the below topic is for you!

What is HRA: Rules and Calculation

Reply to this thread if you have any questions and we’ll be happy to answer them.

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Hi,

I joined a company on this oct. Before that I was working as intern for different company where i got only stipend. I was paying rent since april. But in my current company they are allowing me to declare monthly rent only from OCT for which i can get HRA deduction. Can I claim HRA for rent paid from APR to SEP while filing return?

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Hello @pushpasooraj,

You can claim a deduction for rent paid from April to September u/s. 80GG maximum up to INR 60,000.

You can read more about it here: 80GG - Deduction for Rent Paid - Learn by Quicko

Hope this helps!

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Hi @Bharti_Vasvani ,

As per the conditions mentioned in cleartax.in for 80GG, it is said that HRA should not be received anytime during the year. In my case from November I’m receiving HRA. So in this case can I still claim 80GG from April to September ?

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Hi @pushpasooraj

In order to claim deduction under section 80GG, HRA should not have been received at any point of time of the year. That means you can claim either one of them (HRA or Deduction u/s 80GG).
So, you cannot claim a deduction u/s 80GG from April to September as you have received HRA for November.
Read more about 80GG - Deduction for Rent Paid - Learn by Quicko

Hope this helps.

1 Like
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Got it. Thanks for the clarification

1 Like
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Hullo, Surbhi!

Ref your useful post on Sec 80GG, a question if I may, please:
Situation: I am a retired person with a pension. I have no personal property and live in rented accommodation.
Question: Can I claim rent deduction from my pension? If not, alternatively from interest on my savings in a bank or profits from any business I may have?

Thanks in advance for your advice!
Bharat

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Hello @Yeti,

Yes, you can claim a deduction of rent u/s 80GG as a self employed individual. You will have to file a Form 10BA online by logging in to your income tax account before filing the ITR.

Hope this helps

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Thanks again, for this reply!
A clarification remains: You mention deduction is applicable to self employed. But what if I were just an ordinary pensioner with pension and bank interest as my sole income? Can I not claim deduction against my pension which effectively is equivalent to salary - as I understand - for IT purposes?
Bharat

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Hey @Yeti,

Yes, you can claim the deduction u/s 80GG.