New HRA Rules From April 1, 2026: PAN and Rent Proof Now Mandatory

From April 1, 2026, claiming House Rent Allowance will require stricter documentation as updated tax compliance rules come into effect. Salaried employees claiming HRA must now provide additional details about their landlord, including PAN, along with proper rent proof. The revised framework is intended to increase transparency and help tax authorities verify rental claims more efficiently.

Employees must maintain accurate records of rent payments and submit the required details to their employers while declaring HRA exemptions.

More Cities Eligible for Higher HRA Exemption

The updated rules also expand the list of metro cities eligible for a higher HRA exemption limit. Earlier, only Mumbai, Delhi, Kolkata and Chennai qualified for a 50% exemption on basic salary. Under the revised framework, Bengaluru, Hyderabad, Pune and Ahmedabad have also been added.

As a result, employees living and working in any of these 8 cities can claim an HRA exemption of up to 50% of their salary. For employees residing in other cities, the exemption limit remains at 40%.

New Declaration Form Introduced

Another important change effective April 1, 2026, is the replacement of the existing Form 12BB with a new declaration form called Form 124. Salaried employees must submit this form to declare HRA and other tax-related claims to their employers.

The new form requires additional details, including the landlord’s name, address and PAN. Employees must also disclose their relationship with the landlord, a new disclosure requirement aimed at improving transparency and preventing misuse of HRA benefits.

Rent Agreement and Digital Payment Records

Going forward, submitting rent receipts alone will not be sufficient to claim HRA benefits. Employees are expected to maintain a proper rent agreement with their landlord and keep monthly rent receipts for verification purposes.

Rent payments should ideally be made through banking channels such as bank transfers, UPI or cheques. Cash payments are discouraged and may attract closer scrutiny. Additionally, if the total annual rent exceeds ₹1 lakh, the landlord’s PAN continues to remain mandatory.

Also Read: Key Financial Changes from April 1, 2026: Income Tax Act Overhaul, SGB Rule Shift, Lower Mutual Fund Costs!

Conclusion

With the revised rules taking effect from April 1, 2026, HRA claims will involve stricter documentation and verification. While the exemption calculation formula remains unchanged, employees must ensure accurate records, transparent rent payments and proper disclosures. Reviewing tax planning strategies and understanding the benefits available under the applicable tax regime can help taxpayers maximise their HRA benefits while staying compliant with the updated regulations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a private recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.