Understanding Section 80GG of Income Tax Act A Blessing In Disguise For Individuals Not Having Hra

by Neha Raheja
by Neha Raheja

Partner, Direct Tax

Section 80GG is covered under Chapter VI-A of the Income Tax Act, 1961 and is instrumental in offering deduction in tax to individuals who do not receive any House Rent Allowance (HRA) but are paying monthly rent for the accommodation. Thus, an individual can claim a deduction for rent paid even if he or she does not get house rent allowance. An individual, to claim deduction under this section, should be self-employed or a salaried one. 80GG allows the individuals to claim a deduction in respect of house rent paid. Such house rent paid shall be for his or her own stay. This provision acknowledges the financial burden of such individuals and provides a means to ease their tax liabilities.

An extract of Section 80GG of the Income Tax Act, 1961 is as below:

In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, to the extent to which such excess expenditure does not exceed [five] thousand rupees per month or twenty-five per cent of his total income for the year, whichever is less, and subject to such other conditions or limitations as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations :

Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is –


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; or


Owned by the assessee at any other place, being accommodation in the occupation of the assessee, the value of which is to be determined [under clause (a) of sub-section (2) or, as the case may be, clause (a) of sub-section (4) of section 23].

Explanation.—In this section, the expressions “ten per cent of his total income” and “twenty-five per cent of his total income” shall mean ten per cent or twenty-five per cent, as the case may be, of the assessee’s total income before allowing deduction for any expenditure under this section.]

Key Eligibility Criteria

To avail of the benefits under Section 80GG, individuals must meet certain eligibility criteria:

  • Non-receipt of HRA
    The individual should not receive any house rent allowance from their employer.
  • Self-employed individuals
    This deduction is not limited to salaried individuals. Even self-employed professionals or individuals engaged in business can claim it, provided they meet the eligibility criteria.
  • No property ownership
    The individual, their spouse, or a minor child should not own any residential accommodation in the location where they reside or carry out their employment.
  • The individual has filed a declaration in Form no 10BA
  • The individual should not own any residential accommodation in his or her name at any other place. (In simpler words, if Mr. A, in his income tax return, claims a deduction in respect of self-occupied property and pays rent for a place in which he ordinarily resides but not of his own, he shall not be able to claim deduction under 80GG section.)

Quantum of Deduction

The deduction under Section 80GG is calculated as the lower of the following three amounts:

  • Rent paid minus 10% of total income: The excess of rent paid over 10% of the total income is eligible for deduction Or
  • 5,000 per month: The maximum deduction allowed is Rs. 5,000 per month Or
  • 25% of total income: The deduction is capped at 25% of the total income.

Illustration for better understanding

Mr. A, a self-employed individual, pays Rs. 15,000 per month as rent. His total annual income is Rs. 6,00,000. Calculate the deduction under section 80GG in the hands of Mr. A

Calculation of Deduction Under Section 80GG

Rent paid minus 10% of total incomeAnnual Rent Rs. 1,80,000/- (15,000*12)A
10% of Total Income Rs. 60,000 
Rs. 1,20,000/-                         
Rs. 5,000 per monthRs. 60,000/- (5,000*12)         B
25% of total incomeRs. 1,50,000/- (25% of 6,00,000)C

             Deduction under section 80GG would be lower of A, B or C above, i.e., Rs. 60,000/-


Section 80GG is a crucial provision for individuals facing the challenge of not receiving HRA but still incurring rental expenses. By providing this deduction, the Income Tax Act recognizes the financial burden of such individuals and seeks to alleviate their tax liabilities. Taxpayers should ensure compliance with the eligibility criteria and maintain proper documentation to avail themselves of the benefits under Section 80GG effectively.

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