Claiming HRA While Paying Rent to Family? Proposed Rule May Require Relationship Disclosure

Taxpayers using the Old Tax Regime to claim House Rent Allowance (HRA) may soon face stricter disclosure norms. Under the draft Income-tax Rules 2026, individuals who pay rent to parents, spouse, or other relatives could be required to declare their relationship with the landlord, not just submit rent receipts and PAN details.

The proposed change aims to tighten scrutiny on HRA claims and curb misuse of tax exemptions.

What the Proposed Rule Says

According to the draft provisions, employees claiming HRA exemption will need to provide additional details if their annual rent exceeds ₹1 lakh. Along with the usual information, taxpayers may have to disclose how they are related to the landlord.

The key details likely to be mandatory include:

• Name of the landlord

• Address of the landlord

• PAN of the landlord

• Nature of relationship with the landlord

This requirement has been proposed under Rule 205 of the draft Income-tax Rules 2026 and is particularly targeted at high-value rent payments.

How the Current Rule Works

Under the existing Income Tax Department framework (Income-tax Rules, 1962), taxpayers claiming HRA must provide the landlord’s name, address, and PAN only when annual rent exceeds ₹1 lakh.

However, there is currently no obligation to disclose the relationship between the tenant and landlord. Because of this gap, some taxpayers reportedly showed rent paid to family members to maximize tax savings.

Why the Government Wants This Change

The proposed rule is designed to detect and prevent fake or inflated HRA claims. Tax authorities have been investigating cases where:

• Rent is shown as paid to relatives but no real money changes hands

• The landlord does not declare rental income in their tax return

• Paper rent agreements are used purely for tax benefits

By mandating relationship disclosure, the tax department will be able to cross-verify whether the transaction is genuine and properly reported by both parties.

Officials also want closer monitoring of large intra-family financial transactions, which often escape detailed scrutiny.

Higher Chances of Tax Notices

If the proposal is implemented, mismatches between the tenant’s HRA claim and the landlord’s income disclosure could trigger automated scrutiny.

For example:

• If you claim high rent paid to parents

• But they do not report rental income in their ITR

…the tax system may flag the case for further verification. This could increase the likelihood of notices in questionable cases.

Recent enforcement drives have already uncovered organized networks filing incorrect deductions and refunds, including misuse of HRA provisions.

Genuine Rent Payers Need Not Worry

Experts say taxpayers who honestly pay rent to family members and maintain proper documentation should not be concerned.

To stay compliant, ensure:

• Rent is paid through banking channels

• A valid rent agreement is in place

• Proper rent receipts are maintained

• The landlord reports rental income in their tax return

• PAN details are correctly furnished

If both tenant and landlord report transactions transparently, HRA benefits should continue without issues.

Bottom Line

The proposed update to HRA rules signals tighter tax compliance in the Old Tax Regime. If implemented, simply submitting rent receipts may no longer be enough when paying rent to relatives. Taxpayers may soon need to disclose their relationship with the landlord, especially in high-value cases.

While the move targets fraudulent claims, genuine taxpayers who maintain proper records and follow due process are unlikely to face problems.