Summary of this article
Draft rules may require disclosing landlord relationship for HRA claims
Renting from parents/relatives still allowed with proper lease and bank payments
Landlords must report rental income to support tenant HRA claims
Move aims to curb misuse via tighter data matching and scrutiny
Mandatory disclosure of landlord relationships under the Draft Income-Tax Rules, 2026, could reshape how salaried Indians claim HRA. Does that mean that you cannot claim HRA if you are paying rent to a parent or relative? Experts clarify.
What It Means
“Formal reporting does not prohibit renting from parents, in-laws, or a spouse; such arrangements remain lawful provided there is a valid lease, bank-channel rent payments, and the landlord declares the rental income in their return,” says B. Shravanth Shanker, managing partner, B. Shanker Advocates.
Paying rent to parents, in-laws, or even a spouse, thus, remains legally permissible. What changes is the level of formality. “Such arrangements will now need to look and operate like genuine rental transactions, with a written agreement, rent paid through bank transfers, and rental income disclosed in the landlord’s tax return. Informal family understandings will no longer be sufficient if a tax benefit is being claimed,” says Madhura Samant, managing partner, Elarra Law Offices.
Ensuring HRA Claims Match Landlord Disclosures
“It will help curb misuse for those taxpayers who, for the purpose of taking exemption on HRA, did claim rental arrangements with family members/relatives; however, the recipient of rentals (these family members/relatives) did not declare such income in their returns,” says Ritika Nayyar, partner, Singhania & Co.
This mandatory information shall help the department trace the receipt and its due taxation. It would help track the correctness of claims vis-à-vis the taxation thereon or at least the correct reporting of such income in the hands of the landlord. “However, it will also add a layer of complexities for the already compliant taxpayers since it could attract deeper scrutiny on the genuineness and validity of HRA claims,” says Nayyar.
Data Matching Brings HRA Claims Under Tighter Lens
The relationship disclosure will likely enable more systematic cross-verification between the tenant’s HRA claim and the landlord’s income filings. With PAN-based reporting and digital records, the tax department can more efficiently match rent payments, property ownership, and income declarations.
“This reflects a broader shift towards data-driven assessment, where related party transactions are automatically visible to the system and are capable of immediate scrutiny,” says Samant.
