TaxTMI 
TaxTMI 
Simplified Rent Deduction Mechanism for Non-HRA Assessees : Clause 134 of the Income Tax Bill, 2025 Vs. Section 80GG of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and yet incur substantial expenditure on rent. The provision operates within the broader legislative framework of deductions under the income tax law, aiming to ensure equity among taxpayers who bear out-of-pocket housing costs. The implementation of Clause 134 is expected to have wide-reaching implications for salaried and self-employed individuals, particularly those residing in urban areas with high rental costs. The provision is also to be read in conjunction with the relevant rules, notably Rule 11B of the Income-tax Rules, 1962, which prescribes procedural compliance for availing such deduction. Objective and Purpose The legislative intent behind Clause 134, much like its predecessor Section 80GG, is to extend tax relief to individ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded the payment is for residential accommodation. The provision is neutral as to the form of accommodation (furnished or unfurnished), thus providing broad coverage. 2. Quantum and Limits of Deduction Clause 134(2) prescribes the manner of computing the deduction: * The deduction is allowable only on rent paid exceeding 10% of total income. * The maximum deduction is capped at the lower of: * Five thousand rupees per month (i.e. Rs. 60,000 per annum), or * 25% of total income for the tax year. This formula is designed to ensure that only substantial rent payments relative to the taxpayer's income are eligible for deduction, and to prevent excessive claims. The "whichever is less" criterion ensures that the deduction is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid while also owning residential property at the same place or elsewhere (if self-occupied). The reference to Schedule III is a new legislative device, the details of which would require examination of the Bill's Schedules. 5. Explanation of "Total Income" Clause 134(5) clarifies that "10% of his total income" and "25% of his total income" mean the respective percentages of total income before allowing deduction under this section. This ensures that the computation of the threshold (10%) and the cap (25%) is made on the gross total income, preventing circularity in deduction calculation. 6. Procedural Aspects and Compliance While Clause 134 itself does not prescribe procedural requirements, sub-section (3) contemplates the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 134 is structurally and substantively similar to Section 80GG. Both provisions grant a deduction for rent paid for personal residence, subject to specified limits and conditions. The language of Clause 134 largely mirrors that of Section 80GG, with only minor variations in drafting style and references to other provisions (e.g., "Schedule III" in Clause 134 vs. "clause (13A) of section 10" in Section 80GG). 2. Eligibility Criteria Section 80GG: Excludes assessees having income falling within clause (13A) of section 10 (i.e., those receiving HRA exempt u/s 10(13A)). Clause 134: Instead of explicit reference to section 10(13A), Clause 134(b) refers to "income falling in Schedule III (Table: Sl. No. 11)," which presumably serves a similar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....134's language is broader and may allow more extensive regulatory intervention. * Terminology for Self-Occupied Property: The cross-referencing to sections for valuation of self-occupied property differs due to the reorganization of sections in the new Bill. * Procedural Requirements: Section 80GG, read with Rule 11B, requires filing of Form 10BA. Clause 134 does not specify this, but sub-section (3) allows for similar requirements to be prescribed. Comparative Analysis with Rule 11B of the Income-tax Rules, 1962 1. Procedural Compliance Rule 11B stipulates that the deduction u/s 80GG shall be allowed only if the assessee files a declaration in Form 10BA. This form requires the taxpayer to declare, inter alia, that he/she does no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rations efficiently. 4. Anticipated Changes under the 2025 Bill Given the continuity in legislative approach, it is likely that rules analogous to Rule 11B will be framed under the new law, possibly updated to reflect contemporary administrative practices (e.g., e-filing, digital verification). Conclusion Clause 134 of the Income Tax Bill, 2025, represents a continuation of the policy and structure of Section 80GG of the Income-tax Act, 1961, providing targeted relief to individuals who incur rental expenditure for their own residence without receiving HRA. The provision is well-calibrated to balance the need for relief with safeguards against abuse, through carefully crafted eligibility criteria, monetary limits, and the potential for ....