Section 134 — Deductions in respect of rents paid. Successor to s.80GG of the 1961 Act.
Section 134 is in Chapter VIII — Deductions to Be Made in Computing Total Income, which runs from section 122 to section 154.
Sub-section (1) allows a deduction from total income for rent, by whatever name called, paid for furnished or unfurnished accommodation occupied by the assessee for his own residence. Sub-section (2) fixes the amount: the deduction runs on rent exceeding 10% of total income, and is then limited to the lower of Rs. 5,000 per month and 25% of total income for the tax year. Sub-section (3) makes further conditions or limitations, having regard to the area or place where the accommodation is situated and other relevant considerations, subject to what is prescribed. Sub-section (4) denies the deduction where residential accommodation is owned by the assessee, his spouse, his minor child or his Hindu undivided family at the place where he ordinarily resides or works, or is owned by him elsewhere and is in his own occupation with its value determined under section 21(6) or (7)(a), or where the assessee has income falling in Schedule III (Table: Sl. No. 11). Sub-section (5) fixes the base: both percentages are of total income before any deduction under this section.
The section gives relief to someone paying for his own residence out of taxed income, restricting it to rent that is a real burden by ignoring the first 10% of total income. The sub-section (4) bars stop the relief going to a person who already has residential accommodation of his own where he lives or works, or whose income already includes the Schedule III item at serial number 11.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Threshold below which rent gives no deduction | 10% of total income | Only rent paid in excess of this is eligible; the 10% is of total income before any deduction under this section | 134(2), read with 134(5) |
| Monetary ceiling on the deduction | Rs. 5,000 per month | One of two ceilings; the lower of this and 25% of total income applies | 134(2) |
| Proportionate ceiling on the deduction | 25% of total income for the tax year | Of total income before any deduction under this section; applies if lower than Rs. 5,000 per month | 134(2), read with 134(5) |
Work it in three steps: take rent paid less 10% of total income, then cap that at Rs. 5,000 a month, then cap it again at 25% of total income, and claim the smallest figure. The total income used at both ends is the figure before this deduction, so the calculation is not circular. Check the sub-section (4) bars before claiming at all — accommodation owned by your spouse, minor child or HUF at the place where you live or work defeats the claim just as your own ownership does, and so does income falling in Schedule III, Table, Sl. No. 11. Further conditions turning on the area or place of the accommodation are left to be prescribed, so the section is not the whole of the test.
An individual with total income of Rs. 6,00,000 before this deduction pays rent of Rs. 10,000 a month, Rs. 1,20,000 for the year, for the flat he lives in. Ten per cent of total income is Rs. 60,000, so only the Rs. 60,000 of rent above that enters the computation; the two ceilings are Rs. 5,000 a month, that is Rs. 60,000 for the year, and 25% of Rs. 6,00,000, that is Rs. 1,50,000, and the lower governs — so the deduction is Rs. 60,000. Both percentages are worked on the Rs. 6,00,000 figure before this deduction, by sub-section (5), so the calculation does not run in circles. The whole claim disappears, however, if his spouse or minor child owns residential accommodation at the place where he ordinarily resides or works: sub-section (4)(a)(i) bars it, not merely his own ownership.
In the deductions claimed in an individual's return, and in the rent receipts and landlord particulars produced when that claim is examined. Sub-section (3) also leaves further conditions turning on the area or place of the accommodation to be prescribed, so the rules, not this section alone, complete the test.
The deduction under sub-section (1) shall be allowable on payment of such rent exceeding 10% of his total income, subject to a maximum of Rs. 5000 per month, or 25% of total income for tax year, whichever is less.
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the notifications index.