Section 134 of the Income-tax Act, 2025 allows a deduction for rent paid for your own residence, limited to rent exceeding 10% of total income, subject to a maximum of ₹5,000 per month or 25% of total income, whichever is less.
What section 134 does
Section 134 is the deduction for rent paid — the successor to section 80GG of the Income-tax Act, 1961. It exists for people who pay rent but receive no house rent allowance, typically the self-employed and salaried employees whose package has no HRA component.
The computation in sub-section (2) is a three-way test. The deduction is available on rent exceeding 10% of total income, subject to a maximum of ₹5,000 per month, or 25% of total income for the tax year, whichever is less.
The disqualifications in sub-section (4) are strict. No deduction is available if the assessee, spouse, minor child, or the HUF of which the assessee is a member owns residential accommodation at the place where the assessee resides or works — or if the assessee owns accommodation elsewhere that they occupy and whose value falls under section 21(6) or (7)(a).
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 80GG | Deduction for rent paid | 134(1) |
| 80GG, proviso | Least of rent over 10%, ₹5,000 a month, 25% of total income | 134(2) |
| 80GG, second proviso | Prescribed conditions by area or place | 134(3) |
| 80GG, Explanation | Disqualification where accommodation is owned | 134(4) |
| 80GG, Explanation | Meaning of total income for the percentages | 134(5) |
| 23(2) | Self-occupied annual value | 21(6) and 21(7) |
Section 134 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — what is deductible
There shall be deducted any expenditure incurred towards payment of rent, by whatever name called, in respect of any furnished or unfurnished accommodation occupied by the assessee for the purposes of his own residence. Rent for business premises or for accommodation not occupied as a residence is outside the section.
Sub-section (2) — the three-way limit
The deduction is allowable on rent exceeding 10% of total income, subject to a maximum of ₹5,000 per month, or 25% of total income for the tax year, whichever is less. In practice this means computing three figures and taking the lowest — and the ₹5,000 monthly cap, being ₹60,000 a year, is usually the binding one.
Sub-section (3) — conditions by area or place
Such other conditions or limitations having regard to the area or place in which the accommodation is situated and other relevant considerations, as may be prescribed, are to be taken into account. The rules therefore matter as much as the section.
Sub-section (4) — who cannot claim
No deduction is allowed where (a) residential accommodation is (i) owned by the assessee, spouse, minor child, or the HUF of which he is a member, at the place where he ordinarily resides or performs his duties or carries on business; or (ii) owned by the assessee at any other place, being accommodation in his occupation, the value of which is determined under section 21(6) or (7)(a); or (b) the assessee has any income falling in Schedule III (Table serial 11).
Sub-section (5) — what 'total income' means here
The expressions 10% of his total income and 25% of his total income mean 10% or 25% of the total income of the assessee before allowing deduction for any expenditure under this section. The base is therefore total income before this deduction — a circularity the sub-section resolves expressly.
Worked example
A self-employed professional with total income of ₹9,00,000 (before this deduction) pays rent of ₹22,000 a month in tax year 2026-27, and owns no residential property anywhere.
| Limb | Working | Amount |
|---|---|---|
| Rent paid in the year | ₹22,000 × 12 | ₹2,64,000 |
| Less: 10% of total income | 10% × ₹9,00,000 | (₹90,000) |
| Limb 1 — rent exceeding 10% | ₹1,74,000 | |
| Limb 2 — ₹5,000 per month | ₹5,000 × 12 | ₹60,000 |
| Limb 3 — 25% of total income | 25% × ₹9,00,000 | ₹2,25,000 |
| Deduction allowed | The lowest of the three | ₹60,000 |
Despite paying ₹2,64,000 of rent, the deduction is ₹60,000 — the ₹5,000 monthly cap almost always governs. This is why section 134 is of limited value in metropolitan rents and why HRA under section 19, where available, is far more useful.
If the same professional's spouse owned a flat in the city where they work, sub-section (4)(a)(i) would deny the deduction entirely, regardless of whether the couple lived in it.
Compliance checklist and due dates
- Confirm that neither the assessee, spouse, minor child nor the HUF owns residential accommodation at the place of residence or work.
- Check whether the assessee owns and occupies accommodation elsewhere valued under section 21(6) or (7)(a) — that also disqualifies.
- Compute all three limbs and take the lowest; the ₹5,000 monthly cap usually binds.
- Use total income before this deduction as the base for the 10% and 25% computations — sub-section (5).
- Check the prescribed conditions by area or place under sub-section (3).
- Where HRA is received, claim through section 19 instead; section 134 is for those without it.
- Check section 202 before claiming, as the new regime restricts most Chapter VIII deductions.
Common mistakes
- Claiming the full rent paid. The ₹5,000 monthly cap and the 25% limit apply.
- Overlooking property owned by the spouse or minor child, which disqualifies the claim.
- Using total income after this deduction as the base for the percentages.
- Claiming both HRA relief under section 19 and this deduction.
- Claiming for rent on business premises, which is not accommodation occupied for one's own residence.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.