A common dilemma arises when taxpayers own property in one city but live on rent in another. Today's Ask Wallet Wise query decodes how Section 80GG works if both spouses own flats in one city but plan to rent a home in another city.
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My wife and I each own one flat in Panvel. We now want to take a bigger flat on leave and licence for five years in Thane, a different city in the same district. We will share the rent equally (50:50), and the rent payable is around Rs 50,000 per month. We may let out both our flats in Panvel. I want to know whether both of us can claim a deduction under Section 80GG for the rent paid in Thane in both situations: (1) if we let out both flats in Panvel, and (2) if we keep those flats vacant for our own use.
Expert's Advice: Section 80GG of the Income Tax Act allows a deduction to salaried individuals who do not receive House Rent Allowance (HRA) and to self-employed individuals who pay rent for the accommodation they occupy.
The deduction is allowed only if the rent paid during the year exceeds 10 percent of the total income (after other deductions). It is available at Rs 5,000 per month, subject to a maximum of 25 percent of total income. This deduction is not available if you, your wife, your minor child, or your HUF owns a house in the same city in which you are living and paying rent even if that house is let out.
You also cannot claim Section 80GG if you own a house in any other place that is kept vacant or reserved for your own occupation. Even if one of the two flats is kept for your own use, the owner of that flat cannot claim the deduction. Since both of you plan to let out your flats in Panvel, you will both be eligible to claim the deduction under Section 80GG. However, as your income details are not available, the exact deduction amount cannot be calculated. This deduction is available only under the old tax regime.
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