New Tax Rule From April 1: HRA Claims Must Disclose Landlord Relationship in Updated Income Tax Forms

In a significant compliance reform aimed at tightening tax reporting standards, the Government of India will introduce revised income tax rules effective April 1, 2026. Under the updated framework, salaried individuals claiming House Rent Allowance (HRA) must now disclose whether they share any familial or personal relationship with their landlord. The move is part of a broader effort to curb false rent claims and improve transparency in tax filings.

Mandatory Disclosure in HRA Claims

According to draft provisions, employees seeking HRA tax exemption will need to explicitly state if they are paying rent to a relative or someone with whom they have any personal connection. Previously, taxpayers only had to report rental details such as amount paid and landlord information, but there was no obligation to reveal the nature of their relationship with the property owner.

Tax professionals say the new disclosure requirement is designed to flag suspicious arrangements where taxpayers may exaggerate rent payments or claim deductions on fictitious agreements. By requiring relationship details, authorities can more easily identify cases where rent is paid to family members solely to obtain tax benefits.

Objective: Reduce Fake or Inflated Claims

Experts believe this rule could significantly reduce misuse of HRA exemptions. In some instances, taxpayers have been found declaring rent payments to relatives without actual financial transactions. With mandatory disclosure, authorities will have additional data points to cross-verify claims and detect inconsistencies.

The change is also expected to encourage more accurate documentation, as individuals may need to maintain proof of genuine rental payments if questioned during scrutiny.

Stricter Scrutiny for Foreign Tax Credit Claims

The revised compliance measures are not limited to HRA. Draft rules indicate tighter verification procedures for taxpayers claiming foreign tax credits. Under the proposed Form 44 requirements, auditors will now be responsible for independently verifying:

• Foreign tax deduction certificates

• Payment proofs

• Applicable exchange rates

• Eligibility under tax treaties

Tax specialists note that these requirements may create challenges for individuals earning income abroad, especially when foreign jurisdictions follow different financial years or issue consolidated tax statements.

Tougher PAN Application Rules for Companies

Corporate compliance norms are also set to become stricter. Companies applying for a Permanent Account Number (PAN) will be required to formally declare that they do not already possess one. If any branch, division, or project office has an existing PAN, internal verification must be completed before filing a fresh application.

This step is intended to prevent duplication of PAN records and improve the accuracy of the tax database.

Expanded Disclosure in Tax Audit Reports

Another key proposal affects tax audit reporting. Under revised Form 26, auditors must now specify whether any remarks or qualifications in statutory audit reports have an impact on a company’s declared income or book profits.

Additionally, businesses will need to provide detailed information about their digital accounting infrastructure, including:

• Accounting software used

• Server location

• Cloud storage details

• Data storage systems

Authorities believe such disclosures will strengthen oversight in an era where financial records are increasingly maintained digitally.

What Taxpayers Should Do Now

Although the rules are scheduled to take effect from April 2026, tax professionals advise individuals and companies to prepare early. Maintaining proper documentation, verifying records, and ensuring accuracy in financial disclosures will help avoid last-minute complications during filing season.

For salaried taxpayers in particular, anyone claiming HRA should review their rental agreements, payment proofs, and landlord details to ensure compliance with the upcoming disclosure norms.

Bottom Line

The upcoming tax rule changes signal a clear shift toward stricter reporting and enhanced verification. By introducing relationship disclosure for HRA claims and tightening audit and credit-claim procedures, authorities aim to reduce fraudulent deductions and strengthen trust in the tax system.

While the reforms may add to compliance requirements, they are expected to create a more transparent and accountable framework for both individual taxpayers and businesses in the long run.