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HRA claim rules India just changed in a way that affects millions of salaried employees — and most people haven’t caught up yet.
From April 1, 2026, the Income Tax Act 2025 came into force, and with it came stricter disclosure requirements for anyone claiming House Rent Allowance. The most significant change targets a common tax-saving arrangement: paying rent to a parent, spouse, or sibling and using that rent to claim HRA exemption.
From April 1, 2026, salaried taxpayers claiming HRA must disclose their relationship with the landlord if the annual rent exceeds Rs 1 lakh, particularly when paying rent to family members such as parents, spouse, or siblings. The rule is aimed at preventing misuse of HRA claims while still allowing genuine deductions. Business Today
This is not a ban. Paying rent to your parents and claiming HRA is still completely legal. What’s changed is how hard you have to prove it’s real.
What specifically changed
Form 12BB — through which employees declare their HRA claims — has been replaced by Form 124 under the Income-tax Rules, 2026, notified by CBDT on March 20, 2026. The new form requires employees to disclose whether their landlord is a relative, and if so, the nature of the relationship. Landlord name, address, and PAN above the Rs 1 lakh annual rent threshold were already required — the new mandatory element is explicitly stating the family connection. Futurex
CA Nitin Kaushik put it plainly: “If you are claiming HRA for a flat owned by your spouse or parents without a formal, market-rate agreement, you are not optimising tax — you are flagging your return for immediate scrutiny under the new related-party disclosure rules.” Business Today
The system now automatically cross-checks: your HRA claim against your landlord’s ITR, property ownership records, and bank transaction history. If you declared rent payments but your parent didn’t declare rental income — it flags immediately.
What genuinely changes for Bengaluru, Hyderabad, Pune, and Ahmedabad
There is also a benefit tucked inside the same rule change. The new Income Tax Rules 2026 extend the 50% HRA exemption to four more tech cities — Bengaluru, Pune, Hyderabad, and Ahmedabad — bringing the total to eight cities eligible for the higher rate. Previously, only Delhi, Mumbai, Chennai, and Kolkata qualified. Cleartax
For an employee in Bengaluru earning Rs 80,000 per month basic salary and paying Rs 45,000 in rent, the maximum exemption now rises to Rs 40,000 per month under the 50% rule, compared to Rs 32,000 under the previous 40% rule — a difference of Rs 96,000 in taxable income per year. Futurex
What you need to do if you’re in a family rental arrangement
Make sure rent is paid through bank transfer, UPI, or cheque — never cash. Your parent or relative must declare the rental income in their own ITR. Get a proper rent agreement in place with market-rate terms. If you’ve been doing this informally, April 2026 is the time to formalise it before the first payroll cycle of the new financial year.
Sources: Hindustan Times | Business Today | Upstox
