April 1 Rule Change – Claiming House Rent Allowance (HRA) is set to become a more scrutinized process for salaried taxpayers across India. Under the newly introduced Income Tax Act 2025, the government has proposed significant reforms to how HRA exemptions are claimed, with the revised rules scheduled to take effect from April 1, 2026.
A Key Addition: Form 124
One of the most notable changes introduced through the draft rules is a brand-new declaration form — Form 124. Under this requirement, employees claiming HRA must explicitly disclose whether they share any family or personal relationship with the landlord to whom they are paying rent. This was not a requirement under the existing framework, making it a significant shift in compliance obligations.
Cracking Down on Fraudulent Rent Receipts
A common tax-saving practice has involved taxpayers showing rental payments made to parents or close relatives — often without any genuine tenancy arrangement in place. The new disclosure mandate is expected to bring such transactions under closer scrutiny. By requiring the nature of the relationship to be declared upfront, tax authorities will find it considerably easier to verify the authenticity of HRA claims, thereby improving overall transparency in the system. Tax experts believe this move will go a long way in curbing misuse of the exemption.
Information Required While Filing HRA Claims
Under the revised rules, salaried individuals will need to furnish the following details about their landlord when claiming HRA:
- Full name of the landlord
- Residential address
- PAN (Permanent Account Number)
- Nature of relationship with the claimant (if any)
Renting from Family Members — Still Allowed, but With Conditions
Importantly, the new rules do not prohibit renting a property from a family member. However, such arrangements will now need to meet stricter conditions to be considered valid for tax purposes:
- A legally valid rental agreement must be in place.
- Rent payments must be made through banking channels — cash payments will not be accepted.
- The landlord (family member) must declare the rental income in their own Income Tax Return (ITR).
What This Means for Taxpayers
These reforms signal a broader push by the government toward greater financial transparency and accountability in personal tax filings. Taxpayers who have been claiming HRA through informal or unverified arrangements should take note and ensure their documentation is in proper order well before April 2026.
