Income Tax HRA New Rules 2026: Check new landlord disclosure rule, forms & what salaried

The government has proposed major compliance changes under the New Income Tax Act, 2025, which will come into force from April 1, 2026. One of the biggest updates directly impacts salaried individuals claiming House Rent Allowance (HRA).

Under the proposed draft rules, employees will now have to disclose their relationship with the landlord while claiming HRA. This move aims to reduce fake or inflated rent claims.

Event/Category	Details/Dates
Organization Name	Income Tax Department, Government of India
Act Name	New Income Tax Act, 2025
Effective Date	April 1, 2026
Key Form for HRA	Form 124 (Proposed)
Official Website	Available Here

What Is Changing in HRA Rules?

Currently, employees provide rent details to their employer for HRA exemption. However, there is no mandatory declaration regarding the relationship with the landlord.

From FY 2026–27 onwards, under proposed Form 124:

• Employees must declare they do not have a family or related-party relationship with the landlord.
• Disclosure of the nature of relationship (if any) becomes mandatory.
• Incorrect or false declaration may invite scrutiny.

Why Is This Rule Introduced?

Tax authorities observed cases where:

• Rent was shown as paid to close relatives.
• Inflated rent agreements were created to maximise exemption.
• Documentation lacked transparency.

According to tax experts, this step will:

• Reduce bogus HRA claims
• Improve audit trails
• Increase accountability in rent transactions

Genuine tenants need not worry — but documentation must be clean.

Who Is Eligible to Claim HRA in 2026?

You can claim HRA if:

• You are a salaried employee
• HRA component is mentioned in your salary structure
• You live in rented accommodation
• You pay actual rent and can provide proof

Important Conditions

• PAN of landlord is required if annual rent exceeds ₹1 Lakh
• Rent receipts and agreement must be available
• Now, relationship disclosure will also be mandatory

Selection & Verification Process (How Scrutiny May Happen)

Though HRA is not a competitive selection process, verification may include:

• Cross-checking landlord PAN with IT database
• AI-based mismatch detection
• Employer verification during TDS processing
• Audit queries under scrutiny cases

If discrepancies are found, exemption can be reversed and tax demand may arise.

Tightened Rules for Foreign Tax Credit (Form 44)

The proposed Form 44 introduces stricter compliance for foreign income tax credits.

Chartered Accountants must now independently verify:

• Foreign tax deduction certificates
• Proof of tax payment
• Exchange rate conversion accuracy
• Tax treaty eligibility

This may create complications where:

• Integrated tax statements are issued abroad
• Tax is deposited in a different financial year

Employees working in multinational companies or having overseas income must maintain complete documentation.

PAN Application Rules for Companies Made Stricter

Companies applying for PAN must now declare:

• They do not already possess a PAN
• No duplicate PAN exists for branch/project offices

Internal verification will be mandatory to avoid duplication.

Changes in Income Tax Audit Form 26

Audit reporting has also become more detailed.

Now auditors must clearly mention:

• Impact of adverse remarks on income or loss
• Effect of revenue recognition issues
• Share valuation objections
• Understatement of taxable income

Additionally, audit reports must disclose:

• Accounting software used
• Cloud/server details
• IP address
• Country where data is stored
• Indian backup server address

This signals stronger digital compliance and traceability.

Why This Update Is Important for Salaried Indians

This is not just a procedural change. It reflects:

• Increased digital monitoring
• Focus on transparency
• Crackdown on fraudulent tax practices

Compliance costs may rise slightly, but the objective is clear — improve tax governance.

Editor’s Tip (Important for Employees)

• Ensure your rent agreement is properly drafted.
• Match rent amount with bank transfers — avoid cash payments.
• Double-check landlord PAN spelling before submission.
• File documents early — last-minute portal rush can cause technical glitches.

Small errors can delay refund processing.

Frequently Asked Questions (FAQs)

1. From when will the new HRA rule apply?

The new disclosure requirement is expected to apply from April 1, 2026 (FY 2026–27 onwards).

2. Can I claim HRA if I pay rent to my parents?

Yes, but it must be genuine. Proper rent agreement, bank transfer proof, and now relationship disclosure will be required.

3. What happens if I give incorrect landlord details?

If found incorrect during scrutiny, the HRA exemption can be disallowed, and additional tax with penalty may be imposed.