Claim Tax Benefit U/s 80GG Who are not get House Rent With Automated Income Tax Form 16 Part B for F.Y. 2018-19

Section 80GG is one of the lesser-known sections which can be used by taxpayers to lessen their tax burden by claiming tax exemption for rent paid (in case HRA is not part of salary). This section can be used to be either a salaried/pensioner or self-employed taxpayers.

Conditions for Claiming Tax benefit u/s 80GG for Rent Paid

You can guarantee charge conclusion on lease paid u/s 80GG at the season of recording government form just if the following conditions are fulfilled:

         The finding is accessible just for people and HUFs

         For a salaried individual to be qualified for tax break u/s 80GG, he ought not to get HRA from his boss.

         Pensioners or Self utilized don't have any HRA thus they can exploit 80GG

         No one in the family including companion, minor kids, self or HUF he is individual from should possess a house in the city you are utilized or conveying your business.

         If you claim a house in the various city, you can't indicate it as self-involved. You need to consider it as regarded to let out – for example – you need to indicate rental pay whether it's really put on the lease.

Moreover, you have to fill structure no 10BA to guarantee tax cut u/s 80GG. This structure isn't to be submitted anyplace yet kept with you for records to show to I-T office if there should be an occurrence of examination.

Download Automated One by One Prepare Income Tax Form 16 Part B for the F.Y. 2018-19

Finding permitted u/s 80GG:

The House Rent finding is least of the underneath 3 numbers:

1.         Rs. 5,000 every month [increased from Rs 2,000 to Rs 5,000 in Budget 2016]

2.         25% of yearly pay

3.         (Rent Paid – 10% of Annual Income)

Expect that Amit has a yearly salary of Rs 5 Lakhs and he pays the lease of Rs 10,000 every month. Here is his tax cut for lease paid.

1.         Rs. 5,000 every month – Rs 60,000

2.         25% of yearly pay – Rs 1,25,000

3.         (Rent Paid – 10% of Annual Income) – Rs 70,000 (1,20,000 – 50,000)

The expense derivation would be least of over 3 numbers = Rs 60,000

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Claim Tax Benefit on both HRA & Home Loan

Can I claim Tax Benefit for both HRA & Home Loan? – A question which is often asked by many taxpayers. This is mainly because many employers do not allow both tax benefits together in certain situations. Unfortunately, this is NOT the right thing to do.

Both HRA and Home Loan Interest tax sections are unrelated. You claim tax benefit on HRA (House Rent Allowance) under section 10(13A) while the tax benefit on payment of interest on home loan comes under section 24(b). However, there can be issues if both the sections are used together with the intent of tax evasion.

We can have four situations for people claiming HRA & Home Loan tax benefit.

1.                 Rented house in place of employment and own house in a different city

2.                 Own flat in the city of employment and stay in a rented house in the same city

3.                 Own flat in the city of employment and stay with parents/siblings in the same city and pay the rent

4.                 Rented house in the different city and own house at the place of employment

1. Rented house in place of employment and own house in a different city

This is a very easy situation to handle. You can easily claim tax benefit on both and NO employer has an issue with this arrangement.

2. Own flat in the city of employment and stay in the rented house in the same city

This is the tricky situation. The first logical question which comes to mind is why would any person owning the house in the same city stay on rent? Most employers have the issue with this arrangement and may not give tax benefit on both HRA & Home Loan.

But legally you can claim tax benefit on both if you can give a valid reason for this arrangement. The reasons can be it's more convenient to stay. For e.g. your flat is on the outskirts with almost negligible public transport, you might not want to live there and rather stay close to your place of employment. The other reason could be the owned house is smaller for the size of the family.There are misconceptions that there should be the minimum distance between two houses. All this is a myth! All you need a genuine reason to stay on rent.

Click here to download Income Tax Calculator for Financial Year 2018-19 & Assess Year 2019-20 as per Finance Budget 2018

Also if you move to your new owned house in the middle of the financial year, it's a genuine thing to do and you can claim HRA for the period you stayed on rent and house loan benefit for the entire year. In case your employer is not ready to give tax benefit on both – you can claim HRA tax benefit from the employer and claim tax benefit on Home Loan while filing your Income Tax return. 

The other question is should the owned house be assumed to have notional rent? The answer is No. If you receive actual rent then show, only then you need to pay tax on that.

3. Own flat in the city of employment and stay with parents/siblings in the same city and pay the rent

The situation is similar as discussed above with the difference being your landlord or landlady is your close relative of parents/siblings. Any such rental transaction is full of suspicion and so you should be very careful if you use this for tax saving. You must do the following:

1.                 Actually, pay the rent by Cheque/ECS etc. and receiver should give rent receipt for the same.

2.                 The landlord/lady should show this rent as “income from house property” and pay taxes on the same.

There have been cases where rent paid to close relatives have been denied tax benefit by income tax department as there was NO evidence of the actual transaction. So stay careful.

4. Rented house in the different city and own house at a place of employment

There may be the case where you have rented a place where your spouse/parents stay (in a different city) while you own a house in the city of your employment and stay there. In this case, you cannot claim HRA tax benefit as HRA is paid for staying on rent for purpose of employment. However, you can easily claim home loan tax benefit.

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Claim Tax Benefit for Rent Paid U/s 80GG,With Automated All in One TDS on Salary for Non-Govt employees for F.Y.2017-18

Section 80GG is one of lesser known sections which can be used by taxpayers to lessen their tax burden by claiming tax exemption for rent paid (in case HRA is not part of salary). This section can be used by being either salaried/pensioner or self-employed tax payers.

Conditions for Claiming Tax benefit u/s 80GG for Rent Paid.

You can claim the tax deduction on rent paid u/s 80GG at the time of filing the tax return only if following conditions are satisfied:

1.                  The deduction is available only for individuals & HUFs

2.           For a salaried person to be eligible for tax benefit u/s 80GG, he should not receive HRA from his employer.

3.                  Pensioners or Self-employed do not have any HRA and so they can take advantage of 80GG

4.                  No one in the family including spouse, minor children, self or HUF he is the member of should own a house in the city you are employed or carrying your business.

5.                  If you own a house in a different city, you cannot show it as self-occupied. You have to consider it as deemed to let out – i.e. – you have to show rental income whether or not it’s actually put on rent.

Additionally, you need to fill form no 10BA to claim tax benefit u/s 80GG. This form is NOT to be submitted anywhere but kept with you for records to show to I-T department in case of scrutiny.

Download: Automated All in One TDS on Salary for Non-Govt employees for F.Y.2017-18

The deduction allowed u/s 80GG:

The House Rent deduction is a minimum of the below 3 numbers:

1.                  Rs. 5,000 per month [increased from Rs 2,000 to Rs 5,000 in Budget 2016]

2.                  25% of annual income

3.                  (Rent Paid – 10% of Annual Income)

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SAVE INCOME TAX FOR F.Y.2017-18, WITH ALL TYPES OF INCOME TAX PREPARATION EXCEL BASED SOFTWARE FOR F.Y.2017-18 IN NEW TAX SLAB F.Y.2017-18

1. The tax rate for income between Rs 2.5 lakh to Rs 5 lakhs has been reduced to 5% from 10%

2. 10% Surcharge introduced for Income between Rs 50 Lakhs to Rs 1 crore

3. Tax Rebate under Section 87A reduced to Rs 2,500 for income up to Rs 3.5 Lakhs

4. Tax exemption under RGESS (Rajiv Gandhi Equity Scheme) has been discontinued from FY 2017-18

Download: Automated All in One for Non-Govt Employees for F.Y.2017-18 with Form 12 BA.

5. Loss from House/Property capped at Rs 2 Lakh irrespective if the house is rented or self-occupied

6. NPS tax deduction for self-employed increased to 20% of gross income

Mentioning Some Points I am frequently asked

1. There is NO tax benefit on Infrastructure Bonds

2. There is NO separate tax slab for Men & Women

We give a brief of all the tax saving sections below:

1. Section 80C/80CCC/80CCD

These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.

You can choose from the following for tax saving investments:

1.                 Employee/ Voluntary Provident Fund (EPF/VPF)

2.                 PPF (Public Provident fund)

3.                 Sukanya Samriddhi Account

4.                 National Saving Certificate (NSC)

5.                 Senior Citizen’s Saving Scheme (SCSS)

6.                 5 years Tax Saving Fixed Deposit in banks/post offices

7.                 Life Insurance Premium

8.                 Pension Plans from Life Insurance or Mutual Funds

9.                 NPS

10.            Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)

11.            Central Government Employee Pension Scheme

12.            Principal Payment on Home Loan

13.            Stamp Duty and registration of the House

14.            Tuition Fee for 2 children

We have done a comprehensive analysis of all the above available options and you can choose which is the best for you.

Download: Automated All in One TDS onSalary for Govt & Non-Govt employees For F.Y.2017-18 with Arrears ReliefCalculation U/s 891(1) & Form 10e

2. Section 80CCD(1B) – Investment in NPS

Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. This is continued this year too. We have done a complete analysis which you can read by clicking the link below.

Download: Automated Pan Application Form 49A( New Format)

3. Payment of interest on Home Loan (Section 24/80EE)

The interest paid up to Rs 2 lakhs on home loan for self-occupied or rented home is exempted u/s 24. Earlier there was NO limit on interest deduction on rented property. Budget 2017 has changed this and now the tax exemption limit for interest paid on home loan is Rs 2 lakhs, irrespective of it being self-occupied or rented. However for rented homes any loss in excess of Rs 2 lakhs can be carried forward for up to 7 years.

Budget 2016 had provided additional exemption up to Rs 50,000 for payment of home loan interest for first time home buyers. To avail this benefit the value of home should not exceed Rs 50 lakhs and loan should not be more than Rs 35 lakhs.

4. Payment of Interest on Education Loan (Section 80E)

The entire interest paid (without any upper limit) on education loan in a financial year is eligible for deduction u/s 80E. However there is no deduction on principal paid for the Education Loan.

The loan should be for education of self, spouse or children only and should be taken for pursuing full time courses only. The loan has to be taken necessarily from approved charitable trust or a financial institution only.

The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. So in all you can claim education loan deduction for maximum eight years.

Download:- All in One TDS on Salary for Govt and Non-Govt Employees for F.Y. 2017-18

5. Medical insurance for Self and Parents (Section 80D)

Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D. You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 30,000 above 60 years of age.

An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 30,000 in case of either parents being senior citizens). This deduction can be claimed irrespective of parents being dependent on you or not. However this benefit is not available for buying health insurance for in-laws.

HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF.

To avail deduction the premium should be paid in any mode other than cash. Budget 2013 had introduced deduction of Rs 5,000 (with in the Rs 25,000/30,000 limit) is also allowed for preventive health checkup for Self, Spouse, dependent Children and Parents. Its continued to this year too.

6. Treatment of Serious disease (Section 80DDB)

Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax. For very senior citizens (more than 80 years of age) the deduction amount is up to Rs 80,000;  while for  senior citizens (between 60 to 80 years of age) it Rs 60,000 and for all others its Rs 40,000. Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you.

To claim the tax exemption you need a certificate from specialist from Government Hospital as proof for the ailment and the treatment. In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed.In case of partial reimbursement, the balance amount can be claimed as deduction

Diseases Covered:

1.                 Neurological Diseases

2.                 Parkinson’s Disease

3.                 Malignant Cancers

4.                 AIDS

5.                 Chronic Renal failure

6.                 Hemophilia

7.                 Thalassaemia

Download: Automated All in One TDS on Salary for West Bengal Govt employees for F.Y. 2017-18

8. Physically Disabled Tax payer (Section 80U)

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability)

A certificate from neurologist or Civil Surgeon or Chief Medical Officer of GovernmentHospital would be required as proof for the ailment.

Disabilities Covered

1.                 Blindness and Vision problems

2.                 Leprosy-cured

3.                 Hearing impairment

4.                 Locomotor disability

5.                 Mental retardation or illness

6.                 Autism

7.                 Cerebral Palsy

Download: Automated Arrears Relief Calculator U/s 89(1)with Form 10 E From F.Y.2000-01 to F.Y. 2017-18

9. Physically Disabled Dependent (Section 80DD)

In case you have dependent who is differently abled, you can claim deduction for expenses on his maintenance and medical treatment up to Rs 75,000 or actual expenditure incurred, whichever is lesser. The limit is Rs 1.25 Lakh for severe disability conditions i.e. 80% or more of the disabilities. Dependent can be parents, spouse, children or siblings. Also the dependent should not have claimed any deduction for self disability u/s 80DDB.

To claim the tax benefit you would need disability certificate issued by state or central government medical board.

You can also claim tax exemption on premiums paid for life insurance policy (in tax payers’ name) where the disabled person is the beneficiary. In case the disabled dependent expires before the tax payer, the policy amount is returned back and treated as income for the year and is fully taxable.

40% or more of following Disability is considered for purpose of tax exemption

1.                 Blindness and Vision problems

2.                 Leprosy-cured

3.                 Hearing impairment

4.                 Locomotor disability

5.                 Mental retardation or illness

Download:- Automated H.R.A. Calculator U/s 10(13A)

10. Donations to Charitable Institutions (Section 80G)

The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G. Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount. Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income. Please note that only donations made in cash or cheque are eligible for deduction. Donations in kind like giving clothes, food, etc is not covered for tax exemption.

How to Claim Sec 80G Deduction?

1.                 A signed & stamped receipt issued by the Charitable Institution for your donation is must

2.                 The receipt should have the registration number issued by Income Tax Dept printed on it

3.                 Your name on the receipt should match with that on PAN Number

4.                 Also the amount donated should be mentioned both in number and words

Download: Automated All in One TDS on Salary for Non-Govt Employees forF.Y.2017-18.

13. House Rent in case HRA is not part of Salary (Section 80GG)

In case, you do not receive HRA (House Rent Allowance) as a salary component, you can still claim house rent deduction u/s 80GG. Tax Payer may be either salaried/pensioner or self-employed.

To avail this you need to satisfy the following conditions:

1.                 The rent paid should be more than10% of the income

2.                 No one in the family including spouse, minor children or self should own a house in the city you are living. If you own a house in different city, you have to consider rental income on the same

The House Rent deduction is lower of the 3 numbers:

1.                 Rs. 5,000 per month [changed from Rs 2,000 to Rs 5,000 in Budget 2016]

2.                 25% of annual income

3.                  (Rent Paid – 10% of Annual Income)

You need to fill form no 10BA along with the tax return form

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