House Rent Allowance (HRA) Rules updated w.e.f April 2026

• Kashish Kumar
• 27 Apr 2026
• 50 Views

From 1 April 2026, the House Rent Allowance (HRA) rules introduced a major change. The change aims to curb fraudulent tax claims and enhance transparency in the tax system. Under the revised norms, the salaried individuals will now be required to reveal their relationship with the landlord - especially if the rent is being given to family members. The decision is a part of the government’s effort to make compliance stricter and make sure that the tax benefits are only provided to genuine HRA claims.

Know the Changes in HRA Rules

The earlier Form 12BB has been replaced by the government with a new form known as Form 124. In the new form, more detailed information is required from the employees. Under the latest system, the employees must disclose whether their landlord is their relative. If they are, then in the form, the exact relationship must be provided (whether they are siblings, spouse, parents, etc.)

For precise calculation of TDS, the form needs to be submitted to the employer. It is anticipated that this extra layer of disclosure would cut down on the HRA claims’ misuse. 

Why were the Changes Necessary?

Many people were claiming HRA benefits by presenting rent payments to family members without any real transactions, as per authorities. Fake receipts pertaining to rent have occasionally been used by certain taxpayers so as to lower their overall taxable income. 

Such fraudulent practices will now be simpler to identify and confirm due to the newly introduced changes in HRA rules. With that being said, the government has made it quite clear that legitimate rental agreements won't be negatively impacted by the change.

Can HRA no longer be Claimed on Rent Paid to Family?

No, HRA can still be claimed on rent paid to the family as long as the arrangement is genuine as well as properly documented. To claim the HRA successfully in such cases, here is what needs to be done:

• The rent must be paid via bank transfer.

• There should be a legally valid rent agreement between the landlord and tenant.

• The rent receipts must be maintained by the salaried individual.

• The income from house rent must be declared by the landlord. This is applicable even if they are the parent of the salaried tenant.

The HRA claim could face rejection in case of failure to comply with the abovementioned requirements. 

Who enjoys HRA Benefits under the New Changes?

The honest taxpayers who adhere to proper documentation will continue enjoying the HRA benefits in an interrupted manner. The revised norms, in fact, strengthen the legitimate claims by making the system more clear. 

If a salaried individual pays rent to their parents and their income is below the taxable limit, they must still file ITR so their claims can be validated and they can avoid any tax complications. 

HRA Benefits only available under Old Regime

It is important to note that while HRA benefits continue to be provided under the old regime, they are still not available under the new regime. Therefore, individuals who have opted for the new regime cannot claim HRA exemptions under the Income Tax Act and rules.

Calculation of HRA Exemption

The tax exemption on HRA is calculated based on the lowest of these three amounts: 

• The actual HRA received by the salaried individual.

• 50% of salary in case of metro cities or 40% in case of non-metro cities.

• The actual rent paid by salaried individual minus 10% of their salary.

It is quite necessary for salaried individuals to understand the abovementioned formula so they can calculate their eligible exemption accurately. 

The Bottom Line

The updated HRA rules w.e.f April 2026 tighten compliance and boost transparency. They aim to eliminate fake HRA claims. At the same time, they do not restrict the honest taxpayers from availing the HRA benefits.

Source: MSN