New HRA Claim Form: Income Tax Draft Mandates Disclosure of ‘Relationship With Landlord’ to Curb Family Rental Evasion
The Income Tax Department’s draft rules propose mandatory disclosure of relationship with landlord in HRA claims to prevent misuse of family rental arrangements.
The Income Tax Department has proposed a new rule that may impact salaried employees claiming House Rent Allowance (HRA). Under the Draft Income-taxRules, 2026, employees will now have to disclose their “relationship with the landlord” while claiming HRA benefits. The change has been introduced through Draft Rule 205 and will be reflected in the updated Form No. 124. This form is...
The Income Tax Department has proposed a new rule that may impact salaried employees claiming House Rent Allowance (HRA). Under the Draft Income-taxRules, 2026, employees will now have to disclose their “relationship with the landlord” while claiming HRA benefits.
The change has been introduced through Draft Rule 205 and will be reflected in the updated Form No. 124. This form is used by employees to declare details of deductions and exemptions to their employer for tax calculation. In the revised format, a new column has been added under the HRA section asking employees to specify their relationship with the landlord, if any.
This move is aimed at checking tax evasion in cases where employees claim HRA for rent paid to family members. In many instances, individuals show rent payments to parents or relatives to reduce their taxable income. While paying rent to relatives is not illegal, the tax department wants to ensure that such arrangements are genuine and not used only for tax saving.
With the new disclosure requirement, the department can use data analytics to verify whether the landlord has declared the rental income in their income tax return. It can also check property ownership details and match the information across tax records. This step is expected to increase transparency in HRA claims.
The draft rules also warn that incorrect reporting or hiding facts may lead to serious consequences. Under Section 270A of the Income Tax Act, a penalty of up to 200 percent of the tax payable can be imposed in cases of misreporting of income. The form will now clearly ask about the relationship, so employees may find it difficult to claim lack of knowledge as a defence.
Employees who genuinely pay rent to relatives should maintain proper documentation. A written rent agreement should be prepared, rent should be paid through bank transfer, and the landlord must declare the rental income in their tax return.
The draft rules are currently open for feedback and may be finalised after public consultation.
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