Daijiworld Media Network – New Delhi
New Delhi, Mar 20: The Centre has notified the Income Tax Rules, 2026, bringing clarity on provisions that will come into effect from April 1 under the Income-tax Act, 2025. The rules will apply for the financial year 2026–27, with taxpayers required to follow them while filing returns by July 31.
A key change relates to House Rent Allowance (HRA) benefits for salaried individuals, with the government expanding the list of cities eligible for higher exemption limits.
Under the revised rules, eight cities will now be eligible for the higher HRA exemption limit of 50 per cent of salary. These include Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. Earlier, the higher limit was largely restricted to a smaller set of metro cities.
The move reflects rising rental costs in rapidly growing urban centres, allowing more taxpayers to claim enhanced benefits.
The exemption will continue to be calculated as the least of three components: actual HRA received, rent paid minus 10 per cent of salary, or 50 per cent of salary for specified cities (40 per cent for others). With the expanded city list, more salaried individuals are expected to benefit.
The rules also introduce a stricter disclosure requirement through Form 124. Taxpayers claiming HRA must now declare their relationship with the landlord, especially in cases where rent is paid to relatives.
This replaces earlier norms that largely required rent receipts and the landlord’s PAN.
Authorities say the new disclosure requirement aims to reduce misuse of HRA claims by enabling better verification of rental transactions. While paying rent to family members remains permissible, taxpayers must now ensure proper disclosure and that the landlord reports the rental income in their returns.
The updated rules signal a tighter compliance framework alongside expanded tax benefits for urban taxpayers.