Section 80GG
Section 80GG of the Income Tax Act provides a deduction on rent paid by individuals who do NOT receive HRA from their employer — typically self-employed professionals or salaried individuals whose salary structure does not include HRA. Available under the old tax regime only.
Understanding Section 80GG
Section 80GG fills the gap for taxpayers ineligible for HRA. The formula is intentionally restrictive — capped at ₹60,000/year, well below the actual rent most metro renters pay. It is more useful as a partial relief than a complete substitute for HRA.
The "no own residential property" condition is strict — owning a flat in your name in the city where you currently work disqualifies you, even if you live in a rented home. Property in another city, or property that you've rented out, is acceptable.
Why it matters
For self-employed renters, 80GG is the only direct rent-related deduction available. The cap is low, but ₹60,000 of deduction at 30% slab is still ₹18,720 of tax savings per year — worth claiming if you qualify. Keep your rent agreement and bank-paid rent receipts for at least 7 years in case of scrutiny.
Example
A self-employed consultant in Mumbai earns ₹12 lakh and pays ₹40,000/month rent (₹4.8 lakh/year). The formula computes: ₹60,000 / 25% × ₹12L = ₹3 lakh / ₹4.8L − 10% × ₹12L = ₹3.6 lakh. The lowest is ₹60,000 — the absolute cap. At 30% slab, tax saving = ₹18,720 per year.
A self-employed consultant in Mumbai earns ₹12 lakh and pays ₹40,000/month rent (₹4.8 lakh/year). The formula computes: ₹60,000 / 25% × ₹12L = ₹3 lakh / ₹4.8L − 10% × ₹12L = ₹3.6 lakh. The lowest is ₹60,000 — the absolute cap. At 30% slab, tax saving = ₹18,720 per year.