News: HRA Claims: Declare Landlord Relationship Above Rs 1 Lakh-29-03-2026

Salaried employees who claim House Rent Allowance (HRA) while paying rent to a parent or other family member will face closer checks from April 1, 2026. Where annual rent exceeds Rs 1 lakh, the claimant will have to state the relationship with the landlord, said Abhishek Soni, CEO, Tax2Win, an income tax portal.

Take Amit, a Mumbai professional who pays his father Rs 1.8 lakh a year in rent. He will need to disclose the landlord-tenant relationship, furnish his father’s PAN, route rent through banking channels and keep a formal rental agreement and consistent records.

Soni said employees must now fill in Form 124, which replaces Form 12BB, and maintain rigorous documentation such as rental agreements and bank-based rent payments, particularly when paying family members.

Paying rent to relatives to claim HRA is common, and it has always needed proof that the arrangement is genuine: typically a rental agreement, rent receipts and the landlord’s PAN if annual rent is above Rs 1 lakh. That evidence will now be scrutinised more closely.

Madhura Samant, Managing Partner, Elarra Law Offices, said the emphasis is on traceability. Rent paid through banks and reflected in the landlord’s tax filings will make a claim more credible, she said, while incomplete or inconsistent documentation, especially on identity and relationship disclosure, could raise the risk of scrutiny and disallowance.

The benefit itself continues. Samant said the revised rules do not prohibit renting from family members, but such arrangements must pass the test of genuineness, backed by formal agreements, actual payment flows and full disclosure.

Claims are likely to be rejected where the transaction is merely notional, for instance where no rent is actually transferred, supporting documents are insufficient or the tenant’s claim does not match the income the landlord reports. A rejected claim raises taxable income and lowers take-home pay.

Failure to disclose the relationship accurately or report the income could trigger an audit. Fraudulent claims can attract penalties under Section 270A of the Income Tax Act ranging from 50% to 200% of the tax payable on under-reported income.

The regulatory intent is to permit legitimate rental arrangements while discouraging artificial ones set up solely for tax advantage.