From April 1, 2026, salaried taxpayers claiming House Rent Allowance (HRA) will need to comply with a stricter disclosure framework.

Form 124, introduced under the Income Tax Act, 2025, replaces the existing Form 12BB and brings an important change under Rule 205 of the Income Tax Rules, 2026.

Key Change: Relationship Disclosure Mandatory

Taxpayers are now required to disclose the relationship with the landlord while submitting HRA claims.

This means that if rent is paid to:

  • Parents
  • Spouse
  • Any related party

the same must be explicitly reported in Form 124.

Why This Matters

The objective is to increase transparency in HRA claims, especially in related-party arrangements.

Non-disclosure or incorrect reporting can be treated as misreporting of income, which may attract penalty under Section 439 of the Income Tax Act, 2025.

  • Penalty can go up to 200% of the tax sought to be evaded

This significantly raises the compliance risk for improper HRA claims.

PAN Requirement – No Change

The existing rule continues:

  • If total rent exceeds ₹1,00,000 per year,
    PAN of the landlord is mandatory

Failure to provide PAN or proper justification may lead to disallowance or scrutiny.

Is Paying Rent to Parents Still Allowed?

Yes, it remains legally permitted, provided:

  • Actual rent payment is made (preferably via banking channels)
  • The property is owned by the parents
  • Parents declare rental income in their income tax return

Artificial arrangements without real transactions may be questioned.

Positive Update: Expanded Metro Benefit for HRA

Alongside stricter compliance, there is a beneficial change:

For HRA calculation, the 50% salary exemption limit (earlier restricted to 4 metros) is now extended to additional cities:

  • Bengaluru
  • Pune
  • Hyderabad
  • Ahmedabad

This increases the potential HRA exemption for taxpayers in these cities.

Practical Takeaway

If you are claiming HRA by paying rent to parents:

  • Disclose relationship correctly in Form 124
  • Maintain rent agreement and payment proof
  • Ensure landlord PAN compliance
  • Confirm rental income is reported by parents

Conclusion

HRA claims involving family members are not disallowed, but they are now under sharper regulatory focus. The shift is towards full disclosure and genuine transactions. Proper documentation and transparency will be critical to avoid penalties.