Kamal Ghorui
Mumbai: Salaried taxpayers claiming House Rent Allowance (HRA) under the Income-Tax (I-T) Act, face tighter disclosure norms from April 1, 2026, with the introduction of a new declaration format: Form 124 which replaces the earlier Form 12BB and requires additional details to curb misuse.Employees are required to submit this form to their employers for the purpose of tax deduction at source (TDS). If they are claiming HRA they will now have to declare their relationship with the landlord.The key change lies in enhanced additional disclosures. Along with details of rent paid and landlord information — which continues to include the PAN number of the landlord if rent paid exceeds Rs 1 lakh annually — employees will now be required to state whether the landlord is a relative and the nature of relationship such as parent, spouse, or sibling.
New HRA disclosure kicks in
Govt officials told TOI that the move is aimed at addressing long-standing concerns over bogus HRA claims within families, where no genuine rental transaction exists. By requiring employees to explicitly disclose the nature of their relationship with the landlord, the I-T department will be better placed to cross-verify rental income declarations and identify mismatches.Tax authorities have during the assessment process historically scrutinised HRA claims involving payments to family members, especially to spouses or parents. Tax tribunals, based on the fact patterns of each case, have upheld or dismissed the HRA claims.Govt officials pointed out that this is not ‘hardship’ as genuine arrangements remain valid. For instance, paying rent to a relative will continue to qualify for HRA exemption, provided there is actual payment of rent via banking channels, supported by documentation such as a rent agreement and rent receipts, and the landlord declares the rental income in his/her I-T return.A tax expert stated that even if the landlord who is a parent has income below the threshold limit, it is advisable that a ‘nil’ I-T return be filed by the recipient-parent. This will provide a trail of evidence and will strengthen the genuineness of the HRA claim.It should be noted that HRA tax sops are available only if the taxpayer opts for the old tax regime.In Mumbai, which is classified as a metro city, HRA tax benefit is relatively higher than in non-metro cities. The exempt portion of HRA is calculated as the lowest of three amounts: the actual HRA received from the employer, 50% of salary (basic plus dearness allowance), or the rent paid minus 10% of salary.
