Section 80GG l Payment of Rent
Circular No. 327 was issued by the Central Board of Direct Taxes on 8 February 1982. Its subject is Section 80GG l Payment of Rent.
Fixes the base of 'total income' for computing the section 80GG deduction for rent paid. The deduction is of expenditure on rent in excess of 10 per cent of total income, limited to the lower of Rs. 300 per month and 15 per cent of total income, rule 11B prescribing the places where the accommodation must be situated. The Explanation says total income means total income before the section 80GG deduction itself. The Board clarifies that this means total income after allowing every other deduction and only leaving out section 80GG - so for a salaried assessee the base is arrived at after the standard deduction under section 16(i) and after deductions such as section 80G. It also restates the two gateway conditions: the assessee must not be in receipt of house rent allowance eligible for exemption under section 10(13A), and neither the assessee nor his spouse or minor child, nor the Hindu undivided family of which he is a member, may own any residential accommodation whatsoever.
The Board had been receiving a large number of references on the true meaning of the Explanation to section 80GG.
SECTION 80GG l PAYMENT OF RENT
540. Whether, for the purposes of computing deduction under the section, total income would be total income of assessee after allowing all deductions except deduction under this section
1. Section 80GG provides for grant of a deduction in respect of any expenditure incurred by an assessee in excess of 10 per cent of his total income towards payment of rent (by whatever name called), to the extent to which such excess expenditure does not exceed Rs. 300 p.m. or 15 per cent of the total income of the assessee for the year, whichever is less and subject to such other conditions as may be prescribed. Rule 11B of the Income-tax Rules prescribes the places in the country where the accommodation should be situated.
2. Two important conditions which should be satisfied before an assessee is entitled to deduction under section 80GG are :
a. the assessee should not be in receipt of any house rent allowance which may be entitled to exemption under section 10(13A); and
b. the assessee or his spouse or minor child or where the assessee is a member of a HUF, the HUF itself should not own any residential accommodation whatsoever.
3. The Explanation to section 80GG provides that the term ‘total income’ should be taken to represent the assessee’s total income before allowing deduction for any expenditure under section 80GG itself.
4. The Board has been receiving a large number of references on the true meaning of the Explanation. In order to arrive at the base of the total income with reference to which the amount of admissible deduction is to be calculated, it is clarified that the total income would be the total income of the assessee after allowing all deductions except the one provided under section 80GG itself. To illustrate, if an assessee is a salaried employee, the total income for the purposes of section 80GG will be arrived at after allowing the standard deduction under section 16( i) and the deduction under section 80G, etc.Circular : No. 327 [F. No. 200/54/81-IT(A-I)], dated 8-2-1982.
In an assessment where the section 80GG deduction has been computed on gross total income instead of the net figure.
An employee's income after standard deduction under section 16(i) and a section 80G deduction is Rs. 24,000. Rent paid is Rs. 6,000. The excess over 10 per cent of Rs. 24,000, that is over Rs. 2,400, is Rs. 3,600; the ceiling is the lower of Rs. 3,600 (being Rs. 300 a month) and 15 per cent of Rs. 24,000, that is Rs. 3,600. The deduction is Rs. 3,600.
Rules it names. Rule 11B of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.
