The government’s Draft Income‑tax Rules, 2026 — which will start applying from April 1, 2026 along with the new Income‑tax Act, 2025 — includes significant updates in how House Rent Allowance (HRA) is claimed and verified for tax exemption. These changes are aimed at improving transparency and curbing misuse of HRA claims.

📑 Why HRA Rules Are Being Updated

Right now, to claim HRA tax exemption (under Section 10(13A) of the old tax regime), employees typically submit rent receipts, a rental agreement, and details of rent paid. However, these alone haven’t always been sufficient to verify the genuineness of claims — especially where rent is paid to family members or relatives.

The new draft rules introduce enhanced documentation and disclosure requirements to ensure that claims are valid, real, and backed by proper data.

📌 1. Mandatory Disclosure of Relationship With Landlord

❗ New Requirement

Under the proposed rules, if you want to claim HRA tax exemption, you’ll now have to declare your relationship with your landlord when submitting documents to your employer. This includes:

• Whether the landlord is a parent, spouse, sibling, or other relative
• If there is no relationship, that must be clearly stated too
  This disclosure will be part of the new Form No. 124 (equivalent to Form 12BB) used for submitting HRA and other tax benefits.

📍 When It Applies

This is expected to be mandatory especially when rent paid in the year exceeds ₹1 lakh (for reporting PAN and landlord details).

🧠 Why It Matters

If the landlord is a family member, your rent claim will still be allowed as long as it’s a genuine rental arrangement, with:
✔ proper rent agreement,
✔ bank transfer evidence for rent paid, and
✔ landlord declaring rental income in their tax return.
However, failure to declare the relationship may trigger scrutiny or denial of exemption.

🧾 2. More Detailed Documentation Required

Apart from rent receipts and agreements, the new rules propose that you submit:

• Landlord’s PAN and Aadhaar details (especially if rent exceeds ₹1 lakh)
• Exact rent paid during the year
• Declaration of relationship status
  All of this has to be provided in Form 124 to your employer when claiming HRA exemption at the time of tax deduction at source (TDS).

This aims to standardise declarations and lessen tax disputes related to HRA claims in the future.

📊 3. Expanded HRA Benefits for More Cities

The draft tax rules also suggest expanding the scope of HRA exemption itself by recognising more metro cities for the higher HRA cap:

• Currently, only Mumbai, Delhi, Kolkata, and Chennai qualify for a 50 % exemption ceiling.
• Proposed additions include Bengaluru, Hyderabad, Pune, and Ahmedabad — reflecting the higher living and rental costs in these cities.

So under the old tax regime, if your employer pays HRA, your exemption limit may increase if you live in these newly added metro cities.

📆 4. When Will These Rules Come Into Effect?

The draft rules, including the updated HRA compliance norms, are scheduled to be implemented from April 1, 2026 — subject to final notification by the government. Until then, these are draft proposals, but they signal the direction of changes.

Be prepared to:
✔ provide detailed disclosures in Form 124
✔ submit evidence of rent paid via bank or wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital transactions
✔ accurately declare landlord relationship and details

⚠️ 5. Penalties and Scrutiny Risks

Failing to disclose your landlord relationship or providing incomplete details may attract:

• Higher scrutiny by tax authorities
• Possible penalties or disallowance of HRA exemption if inconsistent details are found
  Additionally, mismatches between your claim and landlord’s reported rental income can trigger notices.

So it’s important to maintain proper agreements and documentation well before filing your income tax.

🧠 Key Takeaways — New HRA Rules at a Glance

Change

What It Means

Relationship disclosure

You must state your relationship with the landlord when claiming HRA.

Form 124 documentation

More detailed reporting of rent, landlord PAN, and receipts required.

Metro expansion

More cities get higher HRA cap under old tax regime.

Effective

From April 1, 2026 (draft rules).

📌 Final Notes

✔ These aren’t changes in the law itself but in the rules and reporting formats — meaning the HRA exemption provisions (like Section 10(13A)) remain, but compliance and proof requirements are being tightened.

✔ If you pay rent to a relative, you can still claim HRA — provided the arrangement is genuine and properly documented.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.