Direct answer: For tax year 2026–27, an eligible resident individual paying rent for their own home can claim section 134 only under a regime permitting that deduction. The amount is restricted by three tests: rent above 10% of the relevant total income, ₹5,000 for each qualifying rental month, and 25% of that income. A declaration in Form 31 is required. Paying substantial rent does not itself establish eligibility.
Checked on 23 October 2026 against section 134 of the Income-tax Act, 2025, section 202 and Rule 65 of the Income-tax Rules, 2026. The Department’s Form 31 guidance maps former section 80GG and Form 10BA to current section 134 and Form 31. This article addresses tax year 2026–27, not a return for FY 2025–26 under the repealed Act’s continuing provisions.
Establish the regime and ownership position before calculating
Section 202’s default new regime generally excludes Chapter VIII deductions except specified provisions; section 134 is not one of those exceptions. A taxpayer must validly exercise the applicable option out of that regime before claiming this deduction. For business or professional income, option timing and subsequent withdrawal restrictions differ from those for a person without such income. A spreadsheet showing a deduction is not evidence that the regime option was validly exercised.
Section 134(4) excludes specified ownership situations. Check the taxpayer, spouse, minor child and, where relevant, the taxpayer’s HUF for residential accommodation at the place of ordinary residence, employment or business/profession. Also check the taxpayer’s residential property elsewhere occupied by them whose annual value falls under section 21(6) or (7)(a). Do not turn the first test into a blanket rule that ownership anywhere by any relative always disqualifies the taxpayer. Conversely, renting in one city does not automatically cure a self-occupied house elsewhere.
The covered house-rent-allowance income in Schedule III, Table item 11 is a separate statutory exclusion. Collect the annual salary/HRA record rather than relying only on whether an HRA exemption was entered in the return. The examples below assume no covered HRA, no disqualifying property and a valid regime option unless an example expressly changes a condition.
Use a supported income base and all three limits
Let T be the legally computed total income before section 134, after dealing with other applicable deductions and any statutory restrictions affecting the income base. For the ordinary-income examples here, no special-rate income or losses complicate T. Let R be eligible rent actually paid and M the number of qualifying rental months. The working formula is the least of max(0, R − 10% × T), ₹5,000 × M and 25% × T. T is not automatically gross salary, business turnover or the bank credits total.
| Working element | Meaning | Control |
|---|---|---|
| Rent excess | Eligible rent minus 10% of T | A negative result produces no deduction |
| Monthly cap | ₹5,000 for each qualifying rental month | Do not assume twelve months for a shorter tenancy |
| Income cap | 25% of T | Recompute after other allowable deductions |
Use the annual income base even when the tenancy covers only part of the tax year. Keep genuine rent separate from a refundable security deposit, personal utilities and unsupported estimates. A furnished home is not excluded merely because it is furnished. The accommodation must be occupied for the taxpayer’s own residence; commercial-office rent belongs to its own analysis.
Form 31 and the evidence file
Rule 65 requires the declaration in Form 31. Departmental guidance describes filing it with the return and identifies the premises, period of stay, rent and payment mode, landlord particulars and verification. Prepare those details before filing; preserve the acknowledgement and reconcile the declaration with the return. Use the applicable return due date and any officially notified extension for the taxpayer, rather than applying one generic date to every individual.
Retain the tenancy agreement, receipts, bank/payment evidence, landlord identification, income-base computation and the ownership/HRA declarations. Filing Form 31 cannot cure a substantive disqualification. Nor should a preparer assume that an annual ₹60,000 upper bound is an automatic allowance, a reimbursement or the tax saved: the actual tax effect depends on the complete return.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: The monthly limit binds
An eligible individual has T = ₹6,00,000, pays ₹1,80,000 for twelve months and satisfies all conditions. Rent excess is ₹1,80,000 − ₹60,000 = ₹1,20,000; the monthly ceiling is ₹60,000; 25% of T is ₹1,50,000. Deduction: ₹60,000. Total income after this deduction is ₹5,40,000; this is not a calculation of final tax.
Illustrative example 2: The income limit binds
T is ₹2,00,000 and twelve-month rent is ₹1,20,000. Rent excess is ₹1,00,000, the monthly ceiling ₹60,000 and the income ceiling ₹50,000. Deduction: ₹50,000, leaving ₹1,50,000 before any remaining return-level adjustments.
Illustrative example 3: Only a small rent excess qualifies
T is ₹8,00,000 and rent for twelve months is ₹96,000. The excess above ₹80,000 is ₹16,000. It is below both ₹60,000 and ₹2,00,000, so the deduction is ₹16,000, not the entire rent.
Illustrative example 4: Rent below the entry threshold
T is ₹10,00,000 and twelve-month rent is ₹80,000. Rent minus 10% of T is minus ₹20,000. The deduction is zero; it cannot become a negative deduction or a carried-forward rent loss.
Illustrative example 5: A six-month tenancy
For six qualifying months, R is ₹90,000 and the annual T is ₹5,00,000. Rent excess is ₹40,000, the six-month ceiling ₹30,000 and the income ceiling ₹1,25,000. Deduction: ₹30,000. Dividing annual T by two before applying the 10% test would use the wrong base.
Illustrative example 6: Other deductions change T
Ordinary income before other eligible deductions is ₹8,00,000. Other deductions validly reduce it by ₹1,00,000, giving T of ₹7,00,000. With twelve-month rent of ₹1,20,000, the three amounts are ₹50,000, ₹60,000 and ₹1,75,000. Deduction: ₹50,000. Using ₹8,00,000 as T would incorrectly produce ₹40,000.
Illustrative example 7: A favourable formula cannot override the regime
Use the first example’s facts, but the taxpayer remains within section 202’s default regime. The notional section 134 calculation is ₹60,000; the allowable section 134 deduction in that regime is zero. No ₹60,000 subtraction should be posted in that return.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the tax year and governing Act | Return working paper distinguishes tax year 2026–27 from FY 2025–26 |
| 2 | Confirm the regime option is valid | Option acknowledgement and relevant timing analysis |
| 3 | Check HRA income for the whole year | Salary records and covered-HRA conclusion |
| 4 | Check local residential ownership across specified persons | Taxpayer, spouse, minor-child and relevant HUF declaration |
| 5 | Check the taxpayer’s self-occupied property elsewhere | Property schedule and section 21 classification |
| 6 | Verify actual residential rent and qualifying months | Agreement, receipts and payment reconciliation |
| 7 | Compute T before section 134 | Income schedule and other-deduction bridge |
| 8 | Calculate all three limits independently | Rent excess, monthly cap and 25% cap |
| 9 | Complete and verify Form 31 | Premises, period, landlord, payments and acknowledgement |
| 10 | Reconcile the claim with the return | Final deduction and supporting evidence retained |
Sixteen practitioner FAQs
1. Is section 134 the current equivalent of section 80GG?
Yes. The Department’s Form 31 guidance provides that mapping. Use the section and form belonging to the applicable tax year.
2. Does paying rent guarantee a ₹60,000 deduction?
No. That is the maximum for twelve qualifying months; the rent-excess and income caps may produce a smaller amount or zero.
3. Can someone in the default new regime claim it?
Section 202 excludes this deduction. A valid applicable option out of that regime is needed; merely selecting an amount in software is insufficient.
4. What if the individual has business income?
Check the business-income option deadline and restrictions under section 202(4). Do not use the more flexible non-business option mechanics automatically.
5. Is only the taxpayer’s own house relevant?
No. The local ownership test also covers the spouse, minor child and relevant HUF. Obtain a declaration addressing each specified person.
6. Does every house owned elsewhere disqualify the taxpayer?
No. Apply the actual other-place condition, including occupation by the taxpayer and the specified annual-value treatment. Ownership location alone is not the complete test.
7. Can HRA simply be omitted to claim section 134?
Do not assume so. Section 134 contains an exclusion tied to the specified HRA income. Review the salary facts and statutory condition, not only the exemption claimed.
8. Can a self-employed person qualify?
The deduction is not confined to salaried taxpayers. A resident individual with professional or business income must still satisfy the residential, regime and other conditions.
9. Is furnished accommodation excluded?
No. Section 134 covers furnished as well as unfurnished accommodation occupied for the taxpayer’s own residence.
10. Does office rent qualify here?
This provision concerns the individual’s own residential occupation. Business-premises rent requires its separate business-deduction analysis.
11. What income should be used for the percentages?
Use the legally computed income base before this deduction. Gross receipts and gross salary are not reliable substitutes; separately address special-rate income and statutory restrictions.
12. Can a six-month tenant use the full annual cap?
Use ₹5,000 for each qualifying rental month. Keep the percentage tests linked to the relevant annual income base.
13. Is a refundable deposit rent?
A refundable security deposit should not be added to rent merely to increase the claim. Classify payments using the agreement and their actual character.
14. Which declaration applies for tax year 2026–27?
Rule 65 prescribes Form 31. Former Form 10BA belongs to the previous rules; use the current form for the current period.
15. When should Form 31 be prepared?
Prepare it for filing with the return as described in departmental guidance. Determine the taxpayer’s actual return deadline and any notified extension.
16. Does the deduction equal tax saved?
No. It reduces eligible income. Final tax, rebate and other return effects require a complete computation for the chosen regime.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assureTax or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
Resolve eligibility first, then retain a traceable income base and the least-of-three calculation. File the current declaration and reconcile the claim with the chosen regime.