HRA Claims on Rent Paid to Family Members to Require Relationship Disclosure from April 1, 2026

Salaried taxpayers paying rent within the family will face added disclosure norms for House Rent Allowance (HRA) claims from April 1, 2026, according to recent news reports. The change comes under the Draft Income Tax Rules, 2026, framed alongside the Income Tax Act, 2025, which will replace the 1961 law. 

The rule will apply where annual rent paid to a landlord exceeds ₹1 lakh. 

Form-Based Disclosure Introduced 

Employees in such cases will now need to state their relationship with the landlord while filing HRA claims. The disclosure will be made through Form 124. In addition to the relationship, taxpayers will be required to provide the landlords: 

• Name
• Address
• PAN 

The requirement covers rent paid to parents, spouses, siblings, or other relatives. 

Focus on Verifying Rental Arrangements 

The change does not prevent individuals from renting property owned by family members. HRA claims will continue to be allowed where the arrangement shows an actual tenancy. 

This would typically involve a rental agreement, bank-based payment of rent and reporting of the rental income by the landlord in their own tax return. The emphasis shifts from producing rent receipts alone to showing a traceable financial arrangement. 

Data Matching Expected to Increase 

With relationship details now part of the reporting process, authorities may compare HRA claims with other available records. These may include ownership data, income reported by the landlord and payment trails through banking channels, etc. 

Such matching could make it easier to flag cases where rent claimed by the employee does not align with income declared by the recipient. 

Risk of Penalties for Incorrect Claims 

Failure to disclose the relationship, or providing incorrect details, may be treated as misreporting if the claim is found unsupported.  

Under Section 439 of the Income Tax Act, 2025, penalties may extend up to 200% of the tax sought to be evaded. Discrepancies may also result in tax notices. 

Reporting to Increase 

Until now, rent receipts and PAN details were generally sufficient for HRA claims. The proposed rule introduces an additional disclosure layer where rent is paid within the family. 

Read More: HRA Tax Exemption May Expand to More Cities Under Draft Income-tax Rules 2026! 

Conclusion 

Rent paid to family members will continue to qualify for HRA. The change introduces a mandatory reporting requirement where such arrangements exist from April 1, 2026. 

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