HRA Exemption under Old Tax Regime: New Rule w.e.f. 1.4.2026

HRA Exemption under Old Tax Regime: New Rules Effective from 1 April 2026

Salaried Employees & HRA: New Rules Effective from 1 April 2026

The new House Rent Allowance framework, effective from 1 April 2026, introduces important changes for salaried employees claiming HRA exemption under the old tax regime. The revised provisions are aimed at enhancing transparency, improving verification mechanisms, and reducing false House Rent Allowance claims through increased data matching and disclosure requirements.

Key Changes in HRA Rules from 1 April 2026

Expansion of Metro Cities for Higher HRA Exemption

Up to 31 March 2026 : 50% HRA benefit was available only for Delhi, Mumbai, Kolkata and Chennai

From 1 April 2026  

• Additional cities have been included Bengaluru, Hyderabad,Pune and Ahmedabad
• This increases the number of cities eligible for the 50% salary-based House Rent Allowance exemption calculation from 4 to 8.

New Compliance Form

Earlier: Form 12BB 

Now: Form 124

Employees claiming House Rent Allowance benefits may be required to furnish details in the revised compliance form prescribed under the new rules.

Mandatory Landlord Relationship Disclosure

Earlier: Disclosure of a relationship with the landlord was generally not mandatory.

From 1 April 2026

• Employees must disclose the relationship with the landlord where applicable. This is particularly relevant where rent is paid to Parents, Spouse and Other relatives

Additional Information Required for Higher Rent Claims:

For rent exceeding prescribed limits:

Earlier, the permanent account number of the landlord was generally required.

Now, the Permanent Account Number of the landlord continues to be required. and relationship disclosure with the landlord is also mandatory.

Technology-Based Verification

Earlier, House Rent Allowance verification largely relied on Rent receipts, rent agreements, and Supporting documents

From 1 April 2026: Greater use of the Annual Information Statement, data analytics, cross-verification mechanisms, and digital matching of taxpayer information. This means HRA claims may be subject to increased scrutiny and automated verification.

Important Note: House Rent Allowance exemption continues to be available only under the Old Tax Regime.

Employees opting for the new tax regime cannot claim the house rent allowance exemption.

Impact of House Rent Allowance on Salaried Employees

The revised house rent allowance rules are intended to Strengthen compliance and reporting accuracy. Reduce mismatched or fictitious rent claims. Promote transparency in rent transactions, Improve tax administration through technology-driven verification and ensure genuine taxpayers continue to receive legitimate House Rent Allowance benefits.

Key Takeaway of House Rent Allowance change

Salaried taxpayers claiming House Rent Allowance should maintain proper rent documentation, ensure accurate landlord details are reported, and verify that Permanent Account Number, Aadhaar, and income tax records are consistent. With enhanced reporting and data-driven verification mechanisms, maintaining complete and accurate records will become more important than ever.