A major change in House Rent Allowance (HRA) rules has come into effect from April 1, 2026, aimed at curbing fraudulent tax claims and improving transparency. Under the revised norms, salaried individuals will now have to disclose their relationship with the landlord—especially if rent is being paid to family members.

The move is part of the government’s effort to tighten compliance and ensure that only genuine HRA claims receive tax benefits.

What Has Changed in HRA Rules?

The government has replaced the earlier Form 12BB with a new declaration format, often referred to as Form 124, which requires more detailed information from employees.

Under the new system:

• Employees must declare whether the landlord is a relative
• If yes, the exact relationship must be specified (parents, siblings, spouse, etc.)
• The form must be submitted to the employer for accurate TDS calculation

This added layer of disclosure is expected to reduce misuse of HRA claims.

Why This Change Was Introduced

Authorities observed that many individuals were claiming HRA benefits by showing rent payments to family members without actual transactions. In some cases, fake rent receipts were used to reduce taxable income.

The new rule ensures that such practices are easier to detect and verify. However, the government has clarified that genuine rent arrangements will not be affected.

Can You Still Claim HRA on Rent Paid to Family?

Yes, but only if the arrangement is legitimate and properly documented.

To successfully claim HRA in such cases:

• Rent must be paid through bank transactions
• A valid rent agreement should be in place
• Rent receipts must be maintained
• The landlord (even if a parent) must declare this income in their ITR

Without these steps, your claim could be rejected.

Who Benefits from These Changes?

Honest taxpayers who follow proper documentation will continue to enjoy HRA benefits without any issue. In fact, the new rules strengthen genuine claims by making the system more transparent.

For example, if you pay rent to your parents and their income is below the taxable limit, they should still file an income tax return. This helps validate your claim and avoids complications.

Important: Old vs New Tax Regime

It is crucial to note that HRA benefits are available only under the old tax regime. If you have opted for the new tax regime, you cannot claim HRA exemptions.

How is HRA Exemption Calculated?

The tax exemption on HRA is determined by the lowest of the following three:

• Actual HRA received from the employer
• 50% of salary (for metro cities) or 40% (for non-metros)
• Rent paid minus 10% of salary

Understanding this formula is essential to calculate your eligible exemption correctly.

Final Takeaway

The updated HRA rules from April 2026 mark a shift toward stricter compliance and transparency. While they aim to eliminate fake claims, they do not restrict genuine taxpayers from availing benefits.

If you are claiming HRA—especially when paying rent to family members—ensure proper documentation and honest reporting. A small mistake or oversight could cost you valuable tax savings.