Rent Paid to Relatives Must be Disclosed Under Draft I-T Rules

Draft Income-Tax Rules 2026: Implications for Salaried Individuals Claiming House Rent Allowance (HRA)

Key Provisions

The draft income-tax rules 2026 proposes to require salaried individuals to disclose their relationship with the landlord in Form 124, where the aggregate rent paid during the tax year exceeds Rs 1 lakh. This disclosure is aimed at verifying the legitimacy of the claim for House Rent Allowance (HRA) under the old tax regime.

Eligibility and Documentation

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Salaried individuals can continue to claim HRA for rent paid to parents, spouses, or other relatives, provided the arrangement is genuine. To claim HRA, individuals must:

• Have a valid rental agreement
• Pay rent through proper banking channels
• Ensure the landlord reports the rental income in their income-tax return

Required Disclosure

When filing Form 124, individuals must disclose the following information:

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• Name of landlord/landlords
• Address of the landlord/landlords
• Permanent Account Number (PAN) of the landlord/landlords
• Relationship with the landlord

Consequences of Non-Disclosure

Non-disclosure of the relationship with the landlord amounts to withholding a material fact that is required to be reported under the prescribed rules. If detected, this may be treated as misreporting of income, resulting in a penalty of up to 200% of the tax sought to be evaded under Section 439 of the Income Tax Act, 2025.

Best Practices

To prevent any future issues, individuals receiving rent payments (e.g., spouses or parents) should also report the rental income in their Income Tax Return. Maintaining proper documentation and ensuring the arrangement is real and well recorded can help avoid potential problems.