According to the new provision, if an employee rents to a relative, they must disclose their relationship to the landlord in Form 12BA. Previously, only the landlord’s PAN was required, but this is no longer the case.
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Income Tax New Rules: If you’re employed, this news may be useful. The draft Income Tax Rules 2026 contain some important provisions for employed individuals to know. This is especially important for those who live as tenants in a relative’s home.
In fact, it has long been considered a valid tax planning practice for employed individuals to avail of House Rent Allowance (HRA) exemption by paying rent to their parents or close relatives. Let’s find out what updates are available regarding this in the Draft Income Tax Rules 2026.
What are the details?
No changes have been made to the Draft Income Tax Rules 2026 proposed by the Central Board of Direct Taxes (CBDT). According to the new provision, if an employee pays rent to a relative, they must disclose their relationship with the landlord in Form 12BA. Previously, only the landlord’s PAN was required, but this is no longer the case. Now, the relationship with the landlord must also be disclosed, and this information will be provided under the heading “Relationship with Landlord.” This means that the draft rules do not in any way restrict paying rent to parents or relatives. If you pay rent to your parents or relatives, you have no worries.
What do experts say?
According to tax experts, this change is aimed at preventing tax evasion. Its purpose is to make rental transactions between parties transparent, thereby curbing fraudulent or fraudulent claims. If the tenancy is genuine, a proper rental agreement is in place, payments are made through banking channels, and the landlord is disclosing rental income in their income tax returns, the HRA exemption will remain fully valid.
However, if the rent is shown only on paper, the payment is not genuine, or the landlord has not included it in their income, strict action may be taken in such cases.
Accountability for companies, along with auditors
The draft rules propose to increase the accountability of companies, along with auditors, for disclosure of claims for tax credits on foreign income. The proposed Form 44 for claiming tax credits on foreign income further tightens the auditor’s role. Chartered accountants will now be required to independently verify foreign tax deduction certificates, proof of payment, and tax treaty eligibility.
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