Section 80GG is the rent relief for people who don't get HRA. If you're a freelancer, a partner in a firm, or a salaried employee whose employer simply doesn't give House Rent Allowance, this section is your friend. It lets you deduct rent you actually pay for your own home — even though it doesn't come as a tax-free allowance like HRA under Section 10(13A). The golden rule: you cannot claim both 80GG and HRA. If your Form 16 shows any HRA at all, 80GG is off the table for the entire year.
The deduction is the least of these three amounts — and you must calculate all three every time:
1. Rent paid minus 10% of your Total Income
2. ₹5,000 per month (₹60,000 for the full year)
3. 25% of your Total Income
Critical nuance: 'Total Income' for both the 10% and 25% tests means your income before claiming this very deduction. The Act's Explanation makes this explicit — don't reduce TI first.
Before you claim 80GG, tick off the ownership checklist. You (or your spouse, or your minor child) must NOT own a residential property at the place where you work or do business. If you own a house in another city and it's self-occupied — or treated as self-occupied under Section 23 — that also blocks the claim. If you pass these conditions, file Form 10BA (a simple self-declaration) with your return; without it, the deduction can be disallowed in scrutiny. This is asked frequently as a 4-mark or 5-mark question in CA Inter exams, usually combining the three-condition formula with an ownership twist.
Example 1 — Freelancer paying high rent
Mr. Sharma is a freelance graphic designer in Bengaluru. He has no HRA. His Total Income (before 80GG) = ₹8,00,000. He pays rent of ₹15,000/month (₹1,80,000 for the year). He does not own any property. What is his 80GG deduction?
| Test | Calculation | Amount |
|---|---|---|
| Rent paid − 10% of TI | ₹1,80,000 − ₹80,000 | ₹1,00,000 |
| ₹5,000 × 12 months | — | ₹60,000 |
| 25% of TI | 25% × ₹8,00,000 | ₹2,00,000 |
Deduction = Least = ₹60,000
Note: ₹5,000/month cap is the binding constraint here — a very common real-life scenario.
---
Example 2 — Partner with modest income
Ms. Iyer is a partner in a CA firm and draws only her share of profit. Total Income (before 80GG) = ₹3,00,000. Rent paid = ₹8,000/month = ₹96,000 per year. Her spouse owns a flat in Chennai, but she works and lives in Pune (different city). Eligible for 80GG? Yes — spouse's property is in a different city, not at the place of work.
| Test | Calculation | Amount |
|---|---|---|
| Rent paid − 10% of TI | ₹96,000 − ₹30,000 | ₹66,000 |
| ₹5,000 × 12 months | — | ₹60,000 |
| 25% of TI | 25% × ₹3,00,000 | ₹75,000 |
Deduction = Least = ₹60,000
📖 Bare Act text — Section 80GG, Income Tax Act 1961
(click to expand)
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—
(i) 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
(ii) 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.