Good news for salaried employees in these cities as they can get higher HRA exemption; disclosure of relationship with landlord a must as Income Tax Rules 2026 notified

The government has notified the Income Tax Rules, 2026 and under this new regulation, the income tax exemption for house rent allowance (HRA) that only salaried taxpayers can claim remains unchanged from the draft tax rules, 2026. Under the new tax rules, 2026, Hyderabad, Pune, Ahmedabad and Bengaluru are added as new cities which qualify for higher income tax exemption for HRA. Earlier only Mumbai, Kolkata, Delhi, Chennai qualified for higher HRA tax exemption.

These tax rules, 2026 are applicable from April 1, 2026 which means for FY 2026-27 this is applicable. So when you are filing Income Tax Return (ITR) on July 31, 2027, these new rules are applicable.

Additionally, under the Income Tax Rules, 2026, you are required to state your relationship with the landlord in Form 124.

Income Tax Rules, 2026: Rule 279 HRA

HRA tax exemption is least of the following:

• Actual amount of HRA received,
• The amount of actual house rent paid by the salaried person for renting a residential accommodation minus one-tenth of the salary
• 50% or 40% of the amount of salary

SI No.	Location of the residential accomodation	Percentage of salary
	Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru	50%
	Any other place	40%

Income Tax Rules 2026: Form 124: Disclose relationship with landlord

Chartered Accountant Suresh Surana points out that the Income Tax Rules, 2026 propose a new disclosure requirement for salaried employees claiming House Rent Allowance (HRA).

Taxpayers will be required to disclose their relationship with the landlord in Form No. 124 (corresponding to Form No. 12BB) where rent is paid, particularly covering cases where the landlord is a relative.

Surana says: “The intent is to enhance transparency and enable the tax authorities to verify the genuineness of rental arrangements.”

If a person is paying rent to his/her mother, grandmother, any other family members, then they should be aware now of this new declaration?(family rentals)

Surana says that rent paid to close relatives such as parents, grandparents, or other family members is not explicitly prohibited subject to closer factual verification and HRA could be claimed only where the transaction is bona fide and supported by appropriate documentation. But, with this declaration requirement, taxpayers have to clearly state their relationship with the landlord.

Also read: India notifies Income Tax Rules, 2026: What's in it

What should salaried taxpayers do about new HRA declaration?

According to Surana, taxpayers claiming HRA for rent paid to relatives should take the following steps:

• Ensure a genuine landlord-tenant relationship with a clear and written rent agreement.
• Make rent payments through banking channels (bank transfer, cheque, etc.), avoiding cash payments.
• Ensure the landlord declares the rental income in their income-tax return.
• Accurately disclose the relationship with the landlord in the prescribed form while submitting HRA details.

Suresh Kumar S, Partner, Deloitte India, says: "The new rules should greatly help employers and employees given the recalibrated and realigned limits for various employee perquisites and exemptions. While these are largely applicable for those on old regime, employees under new regime should also benefit. Most importantly, timely notification would be welcomed by employers from ease of implementation."