Mumbai: Salaried taxpayers claiming House Rent Allowance (HRA) under the Income-Tax Act will face tighter disclosure norms from April 1, 2026, with the introduction of a new declaration format: Form 124. This form replaces the earlier Form 12BB and requires additional details to curb misuse.
Key Changes in Form 124
Employees are required to submit this form to their employers for tax deduction at source (TDS). If claiming HRA, they must now declare their relationship with the landlord. Along with details of rent paid and landlord information — including the PAN number of the landlord if rent paid exceeds Rs 1 lakh annually — employees will be required to state whether the landlord is a relative and the nature of the relationship, such as parent, spouse, or sibling.
Government's Objective
Government 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 Income-Tax department will be better placed to cross-verify rental income declarations and identify mismatches.
Tax authorities have historically scrutinised HRA claims involving payments to family members, especially to spouses or parents, during the assessment process. Tax tribunals, based on the fact patterns of each case, have upheld or dismissed the HRA claims.
Genuine Arrangements Remain Valid
Government officials pointed out that this is not a 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 their income-tax 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 income-tax return be filed by the recipient-parent. This will provide a trail of evidence and strengthen the genuineness of the HRA claim.
HRA Under Old Tax Regime
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, the 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.
