Public shaming over dues: Can housing societies suspend food delivery and housekeeping for defaulters? Experts weigh in

The Central Board of Direct Taxes (CBDT) has introduced new rules under the Income Tax Act, 2025, bringing important changes to House Rent Allowance (HRA) claims for salaried employees. These rules, effective from April 1, 2026, aim to improve transparency, simplify tax compliance, and offer better tax benefits, especially for individuals living in high-rent cities.

One of the most significant changes is the mandatory disclosure of the landlord-tenant relationship while claiming HRA exemption. Salaried employees will now be required to submit details through Form 12BA, a revised form replacing earlier declarations like Form 12BB. This disclosure includes the landlord’s name, PAN, and the nature of the relationship between the tenant and the landlord.

This requirement becomes mandatory in cases where the annual rent paid exceeds ₹1 lakh and when the landlord is a family member, such as parents, spouse, or siblings. However, it is important to note that there is no restriction on paying rent to relatives. The government has clarified that the intent is not to discourage such arrangements but to ensure transparency and prevent misuse of tax exemptions.

Another major update is the expansion of cities eligible for higher HRA exemption limits. Previously, only four metro cities—Delhi, Mumbai, Kolkata, and Chennai—qualified for a 50% exemption of basic salary plus dearness allowance (DA). Under the new rules, four additional cities—Bengaluru, Hyderabad, Pune, and Ahmedabad—have been included in this category.

HRA exemption continues to be calculated as the minimum of three factors: actual HRA received from the employer, 50% (for specified cities) or 40% (for other cities) of basic salary plus DA, and actual rent paid minus 10% of basic salary plus DA. With more cities now falling under the 50% category, salaried individuals in these urban centres can expect higher tax savings.

For example, consider an individual with a cost-to-company (CTC) of ₹30 lakh, where basic salary plus DA is ₹15 lakh and HRA received is ₹9 lakh. If the person pays a monthly rent of ₹80,000 in a city like Bengaluru, the earlier exemption limit would have been ₹6 lakh (40%). Under the new rules, this increases to ₹7.5 lakh (50%), resulting in an additional exemption of ₹1.5 lakh and a tax saving of approximately ₹47,000, depending on the tax bracket.

The introduction of these rules reflects a broader effort to modernise India’s tax framework. The Income Tax Act, 2025, has been designed to simplify legal language, remove outdated provisions, and make compliance easier for taxpayers. Importantly, while procedural changes have been introduced, there are no new tax rates under this reform.

Overall, the new HRA rules strike a balance between enhanced benefits and stricter compliance. While employees may face a slightly higher documentation burden, particularly when renting from family members, the increased exemption limits and improved clarity are expected to benefit a large segment of salaried taxpayers across India.