Section 80GG: Claim Tax Deduction for Rent Without HRA
For many of us, rent is that one giant monthly expense that seems to swallow a huge chunk of our salary before we even get to enjoy it. If you're a salaried employee, you likely rely on House Rent Allowance (HRA) to ease the tax burden. But what if your company doesn't offer HRA? Or what if you're a freelancer, a small business owner, or a self-employed professional? The good news is that the government hasn't forgotten you. Section 80GG is a special rule designed specifically for people who pay rent but don't get the HRA benefit in their paycheck.
What exactly is Section 80GG?
Think of Section 80GG as a relief valve for renters. It’s a deduction that allows you to subtract a portion of your rent from your total taxable income. It’s meant for people who are paying for a roof over their heads entirely out of their own pocket, without any help from an employer's tax-free allowance.
Whether you’re a consultant working from a rented flat, a lawyer with your own practice, or a salaried person whose HR department just doesn't include HRA in the contract, this section is your go-to for tax savings.
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Who is eligible to claim?
To make sure this benefit goes to those who truly need it, the tax department has a few ground rules for 2025-26:
- Individuals & HUFs only: Companies or big firms can't use this. It’s for you as a person.
- No HRA allowed: You must not have received HRA at any point during the year. If you switched jobs mid-year and one employer gave you HRA while the other didn't, you generally can't claim 80GG for that year.
- The Homeowner Rule: Neither you, your spouse, nor your minor child should own a house in the city where you currently live, work, or run your business.
- No Self-Occupied Claims: If you own a house in another city (say, your hometown), you can't claim it as self-occupied if you want to claim 80GG for the city where you're working. You must show that other house as let-out (rented out).
The Tax Regime Choice
For FY 2025-26, keep in mind that Section 80GG is only available in the Old Tax Regime. If you choose the New Tax Regime (which is now the default), you get lower tax rates but you lose almost all deductions, including this one.
How much Tax can you actually save?
The calculation for Section 80GG is a bit like choosing the smallest game. You can deduct the lowest of these three amounts:
Method
The Calculation
A. The Monthly Cap
₹5,000 per month (Total ₹60,000 per year)
B. Income Percentage
25% of your Adjusted Total Income
C. The Rent Difference
Total Rent Paid minus 10% of Adjusted Total Income
What is Adjusted Total Income? Don't let the name scare you. It's just your total income after you subtract long-term capital gains and other deductions like 80C or 80D.
A Quick Example:
Imagine Suman is a freelancer earning ₹8,00,000 (after other deductions). She pays ₹15,000 a month in rent (₹1.8 Lakh a year).
- Fixed Cap: ₹60,000
- 25% of Income: ₹2,00,000
- Rent - 10% Income: ₹1,80,000 - ₹80,000 = ₹1,00,000
Suman’s deduction = ₹60,000 (the smallest of the three).
Don't forget Form 10BA!
This is the part where most people slip up. You can't just claim the deduction on your tax return and call it a day. You must file Form 10BA on the Income Tax portal.
This form is basically you telling the government: I don't receive HRA, I don't own a house in this city, and yes, I am actually paying this rent. You should file this online before you submit your final ITR. If you miss this, the tax department might reject your claim later.
Renting from Your Parents?
Yes, this is a popular (and legal) strategy! If you live with your parents and pay them rent, you can claim the 80GG deduction.
- The Catch: Your parents must own the house, you must have a formal rent agreement, and they must report that rent as income in their tax returns. It’s a great way for families to plan their taxes together, especially if parents are in a lower tax bracket.
Keeping your documents ready
While you don't need to attach documents to your online return, keep these in your desk drawer just in case:
- Rent Receipts: These should have your landlord's signature.
- Rent Agreement: A simple agreement on stamp paper is enough.
- Landlord's PAN: This is mandatory only if your total rent for the year is more than ₹1,00,000.
Conclusion
Section 80GG is a fantastic backup for anyone who feels they are missing out on tax benefits because they don't have a corporate HRA. While the ₹60,000 limit might feel a bit low if you're living in a city like Mumbai or Bengaluru, it still helps shave off a chunk of your taxable income. For the 2025-26 year, just make sure to run the numbers: if your total deductions (80C, 80D, 80GG) add up to a lot, the Old Regime might still be your best bet. If not, the New Regime's lower rates might be simpler.