Published 26 October 2026
A salaried employee who receives house rent allowance has an exemption for rent. A freelancer, a consultant, a shopkeeper or an employee whose pay has no rent element has no allowance to exempt. For them, section 80GG gives a deduction for rent paid. It is a small deduction: the limit is Rs 5,000 a month, and two other ceilings can reduce it further. It is lost entirely if the person, the spouse or a minor child owns a home in the same town, and it needs a separate declaration. This guide sets out who qualifies, the three-way computation, the declaration and the position under each Act.
Which Act governs which year
Financial year 2025-26 (assessment year 2026-27) and earlier. The Income-tax Act, 1961 applies, through section 80GG. The declaration is Form No. 10BA under rule 11B of the Income-tax Rules, 1962.
Tax year 2026-27 onwards. The Income-tax Act, 2025 applies, through section 134. The declaration is Form No. 31 under rule 65 of the Income-tax Rules, 2026.
Earlier years stay under the 1961 Act by section 536(2) of the 2025 Act.
| Item | 1961 Act | 2025 Act |
|---|---|---|
| The deduction | s.80GG, main part | s.134(1) |
| The three limits | s.80GG, main part | s.134(2) |
| Prescribed conditions | s.80GG; rule 11B (Form 10BA) | s.134(3); rule 65 (Form No. 31) |
| No house rent allowance | s.80GG (“not being an assessee having any income falling within clause (13A) of section 10”) | s.134(4)(b) (income in Schedule III, Table Sl. No. 11) |
| No house owned | proviso to s.80GG | s.134(4)(a) |
| “Total income” for the limits | Explanation | s.134(5) |
Who can claim
No house rent allowance. Section 80GG is not available to “an assessee having any income falling within clause (13A) of section 10”, which is the house rent allowance exemption. Section 134(4)(b) excludes an assessee with income falling in Schedule III, Table serial number 11, the same allowance in the 2025 Act. The bar is framed by reference to receiving that kind of income, not to how much of it is exempt. The ITR-1 validation rules for AY 2026-27, published by the Directorate of Income Tax (Systems), check it by period: where house rent allowance is claimed, section 80GG “is not allowed for the corresponding period”. An employee whose house rent allowance is covered in HRA Exemption and Form 12BB is in that position.
Rent for one’s own residence. The rent must be paid for “any furnished or unfurnished accommodation occupied by him for the purposes of his own residence”. The words “by whatever name called” bring in licence fees and similar payments.
No house owned where the person lives or works. The proviso to section 80GG denies the deduction where residential accommodation is owned:
- “by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family”, at the place where the assessee “ordinarily resides or performs duties of his office or employment or carries on his business or profession”; or
- by the assessee at any other place, where the assessee occupies it and its value is determined as a self-occupied property under section 23(2)(a) or 23(4)(a).
Section 134(4)(a) is the same. Its second limb refers to a house valued under section 21(6) or (7)(a) of the 2025 Act, the self-occupied nil annual value.
Two points follow:
- A house owned by the spouse or a minor child in the same town bars the deduction. A house owned by a parent or an adult child does not.
- A house owned in another town does not bar the deduction if it is let out. It does bar it if the owner claims that house as self-occupied.
The computation: the least of three
Section 80GG allows “any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent”, “to the extent to which such excess expenditure does not exceed five thousand rupees per month or twenty-five per cent of his total income for the year, whichever is less”. The deduction is the least of:
- rent paid, less 10 per cent of total income;
- Rs 5,000 for each month; and
- 25 per cent of total income.
Section 134(2) states the same limits: 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”.
“Total income” here means total income “before allowing deduction for any expenditure under this section” (Explanation to section 80GG; section 134(5)). The other deductions are taken first and section 80GG last. The ITR-1 validation rules for AY 2026-27 apply the ceiling as “Rs.60,000/- or 25% of his total income excluding LTCG before allowing deduction of this expenditure, whichever is less”.
Two examples (old regime, full year of rent).
| Case A | Case B | |
|---|---|---|
| Total income before section 80GG | Rs 6,00,000 | Rs 2,00,000 |
| Rent paid (12 months) | Rs 1,80,000 | Rs 72,000 |
| 1. Rent less 10 per cent of total income | Rs 1,20,000 | Rs 52,000 |
| 2. Rs 5,000 a month | Rs 60,000 | Rs 60,000 |
| 3. 25 per cent of total income | Rs 1,50,000 | Rs 50,000 |
| Deduction (least of the three) | Rs 60,000 | Rs 50,000 |
For a part year, the Rs 5,000 limit applies for the months for which rent is paid.
The Rs 5,000 figure: current, and unchanged by the Finance Act, 2024
The figure in force is Rs 5,000 a month. It appears in section 80GG of the 1961 Act as it stands after the Finance Act, 2025 and in section 134(2) of the 2025 Act. The Finance (No. 2) Act, 2024 did not amend section 80GG: its amendments to Chapter VI-A were to sections 80CCD and 80G. The Finance Act, 2026 did not amend section 134. The annual ceiling is therefore Rs 60,000 for a full year in AY 2026-27 and in tax year 2026-27.
The declaration: Form 10BA, and Form No. 31
Section 80GG makes the deduction “subject to such other conditions or limitations as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations”. Rule 11B of the 1962 Rules prescribes one condition: the assessee “files the declaration in Form No. 10BA”. The ITR-2 validation rules for AY 2026-27 say “Form 10BA is required to be filed to claim deduction u/s 80GG”, and the ITR-1 rules require its details for the claim.
From tax year 2026-27, section 134(3) carries the power and rule 65 of the 2026 Rules carries the condition: “For the purposes of claiming deduction under section 134 in respect of rent paid, the assessee shall file declaration in Form No. 31.” Neither rule prescribes any condition by area or place, so the computation above is the whole of it.
Not available under the new regime
Section 115BAC(2)(i) of the 1961 Act allows no Chapter VI-A deduction other than sections 80CCD(2), 80CCH(2) and 80JJAA. Section 202(2)(a)(xii) of the 2025 Act allows none in Chapter VIII other than sections 124(1) and (2), 125(2) and 146. Sections 80GG and 134 are therefore lost under the new regime, just as the house rent allowance exemption is (section 115BAC(2)(i) excludes section 10(13A), and section 202(2)(a)(i) excludes Schedule III serial number 11).
A person without business income leaves the new regime only in the return filed by the due date. A person with business or professional income opts out on or before that date, and the choice carries forward. See Old or New Regime: The Choice for Employees.
What to have ready
- The rent agreement and receipts, or bank records of each payment, for the months claimed.
- The landlord’s name and address.
- A note of any house owned by the claimant, spouse or minor child (or the HUF), and where it is, to test the bar.
- Confirmation that no house rent allowance was received for the period, from the salary slips or Form 16 if the claimant is employed.
- The total income before section 80GG, after all other deductions, to apply the 10 and 25 per cent limits.
- The acknowledgement of the declaration in Form 10BA (Form No. 31 from tax year 2026-27).
After filing
A deduction missed in the original return can be claimed in a revised return, with the declaration filed; see Belated and Revised Returns. An updated return cannot reduce tax or increase a refund (proviso to section 139(8A); section 263(6)(c) of the 2025 Act). A claim without the declaration, or one that exceeds the limits, is liable to adjustment in the intimation; see The Intimation under Section 143(1).
In order
- Fix the Act: section 80GG and rule 11B for FY 2025-26 and earlier; section 134 and rule 65 from tax year 2026-27.
- Confirm the old regime.
- Confirm no house rent allowance was received for the period claimed.
- Confirm no house is owned by the claimant, spouse or minor child (or HUF) where the claimant lives or works, and no self-occupied house elsewhere.
- Compute total income before section 80GG.
- Take the least of: rent less 10 per cent of that income; Rs 5,000 a month; and 25 per cent of that income.
- File the declaration in Form 10BA (Form No. 31 from tax year 2026-27), and claim the deduction in the return.
The next guide, Forming an HUF: Deed, PAN and Bank Account, begins the series on the Hindu undivided family.