545. 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 year1, 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.