Paying Rent to Your Parents for HRA? What Changed From April 2026
The Income-tax Rules, 2026 ask employees to disclose their relationship with the landlord when claiming HRA, and Pune, Hyderabad, Bengaluru and Ahmedabad now get the 50% limit.
Plenty of salaried people in Mumbai live in a flat owned by their parents. Paying them rent and claiming HRA can be legitimate. From April 2026, the paperwork is stricter.
What changed
- The CBDT notified the Income-tax Rules, 2026 on 20 March 2026, effective 1 April 2026.
- The rules require disclosure of the relationship between tenant and landlord when claiming HRA. Reports say this is done in Form 124, which replaces Form 12BB, along with the landlord's name, address and PAN.
- Reports say landlord PAN is needed where annual rent is more than Rs 1 lakh.
- The 50% HRA limit now covers eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Other places stay at 40%.
How HRA exemption is calculated
The exempt HRA is the least of: the HRA you actually received; rent paid minus 10% of salary; and 50% of salary (40% outside the eight cities). Salary here generally means basic plus dearness allowance. HRA exemption is available under the old regime, not the new one.
Paying rent to a parent can be legitimate. It has to be real rent, actually paid, and declared by the parent as income.
Paying rent to parents: making it hold up
- The parent must own the flat. You can't pay rent to a parent for a flat you own or co-own.
- Sign a rent agreement and register it if required. In Maharashtra, leave and licence agreements must be registered.
- Pay by bank transfer every month. Avoid cash.
- Your parent declares the rent as income in their return, after the deductions they're entitled to.
- Disclose the relationship honestly in Form 124.
Paying rent to a spouse is generally viewed with more suspicion, especially where you share the home. Ask a CA before trying it.
Related reading
Need a registered rent agreement? Book a video call.
Sources
- Outlook Business: CBDT notifies rules effective 1 April 2026
- Angel One: HRA claims on rent paid to family members require disclosure
- Patron Accounting: HRA exemption rules 2026
- ClearTax: Can I pay rent to my parents to save tax?
General information, not tax advice. Check the notified rules and speak to a chartered accountant.
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