Finance minister Arun Jaitley unveiled reforms in Budget 2016. For Individuals and small taxpayers, FM has raised the maximum deduction available under Section 80GG to Rs.60,000 per annum from Rs.24000 per annum. This reform will benefit the individual taxpayers to claim the deduction for the rent paid by them upto Rs.60000 per annum as per the provisions of Section 80GG Of Income Tax Act, 1961.

“The people who do not have any house of their own and also do not get any house rent allowance from any employer today get a deduction of Rs 24,000 per annum from their income to compensate them for the rent they pay. I propose to increase the limit of deduction in respect of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000 per annum, which should provide relief to those who live in rented houses, ” Finance Minister Arun Jaitley said in his budget speech. Deduction for rent payers raised to Rs. 60000 u/s 80GG.

 

As per the provisions of the Act, Section 80GG allows a deduction to Individuals in respect of house rent paid by them for their own residence. Such deduction is allowed subject to the following conditions:

 

• The Individual files the declaration in Form 10BA.

 

• The Individual has not been in receipt of any House Rent Allowance from his employer specifically granted to him which qualifies for exemption under section 10(13A) of the Act.

 

 

• The employee does not own:

 

1. any residential accommodation himself or by his spouse or minor child or where such Individual  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 carries on his business or profession; or

 

2. at any other place, any residential accommodation being accommodation in the occupation of the Individual, the value of which is to be determined under Section 23(2)(a) or Section 23(4)(a) as the case may be.

 

• The deduction u/s 80GG allowed to an individual for the House Rent paid by him will be least of the following :-

 

1. Rent paid minus 10 percent of the total income.
2. 25 percent of the total income.
3. 5000 per month (Rs.60000 per annum) as proposed by Mr Jaitley in Budget 2016 (earlier Rs.2000 pm i.e, Rs.24000 pa)

 

Explanation.—In this section, the expressions “ten per cent of the total income” and “twenty-five per cent of the 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.

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