⚠️ Major compliance tightening for salaried taxpayers claiming House Rent Allowance (HRA).
The Draft Income-tax Rules, 2026 introduce a critical new disclosure requirement that could significantly impact HRA claims—especially when rent is paid to relatives.
📋 What is the New Requirement?
Under proposed Rule 205 & new Form 124, employees must now disclose:
✅ Landlord’s PAN (existing requirement)
✅ Relationship with the landlord (NEW mandatory disclosure)
This applies particularly where rent is paid to:
• Parents 👨👩👦
• Spouse
• Relatives
• Related parties
🔍 Why This Change is Important
The Income Tax Department will now use data analytics to verify:
📊 Whether landlord reported rental income in ITR
🏠 Whether landlord actually owns the property
💳 Whether rent is paid through proper banking channels
This shifts compliance from self-declaration → system-based verification
⚖️ Risk of Penalty for Incorrect Claims
If HRA claim is found to be artificial or misreported:
🚨 Penalty up to 200% of tax under Section 270A
Earlier, such arrangements were difficult to track. Now scrutiny will be automated.
✅ Action Points for Taxpayers Claiming HRA to Relatives
To ensure compliance and avoid disputes:
✔️ Execute proper rent agreement
✔️ Pay rent only via bank transfer
✔️ Ensure landlord reports rental income in ITR
✔️ Maintain complete documentation
🎯 Professional Insight
Genuine HRA claims remain fully valid. However, informal or tax-engineered arrangements will face higher scrutiny.
📞 For professional guidance on salary structuring and tax planning:
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