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The Income Tax Department now wants to come after people who pay rent to their relatives to save taxes under HRA and I'll tell you exactly what is happening. So as per the draft Income Tax Rules 2026 which people expect may come into effect from 1st of April, the tax department has said that if you pay rent, you will have to disclose under Form 124 to your employer one additional information which is whether you have a with the landlord. Now, a lot of people pay rent to their sibling, their spouse, their parents or in-laws. Now, there are five things that people are expecting that the tax department is going to specifically check. First is, well, what is your relationship with the person and whether the rent that you're paying is as per market standards, because a lot of people actually calculate rent based on optimizing the deduction as per their HRA. So they would hope that you are not paying more rent, you know, only to avoid taxes when the rentals actually in that market are much lower. The second thing they will check is whether the landlord is disclosing that rental income in their ITR. Third thing they will check is whether the landlord actually owns the property. A lot of times what happens is your mother and father could be both joint owners, but you are paying rent only to your mother. So they're going to see why are you not paying rent to your father and what is the reasoning behind it. Fourth thing they are going to check whether there is adequate documentation. For example, a rent agreement are their monthly rent rece? Fifth thing, they're going to check whether you're making payments on a monthly basis through banking channels. A lot of people just disclose it to the employer, never actually make the payment or make the payment in lump sum at the end of the year. They're going to treat that as not a genuine transaction. Now, these are still draft rules, but people are expecting they will come into effect from 1st of April and if you've not made these changes for compliance, do it right away. Because if they find out that your transaction is not genuine, the penalty imposed will be 200%. Share it with someone who may need it.

The Income Tax Department now wants to come after people who pay rent to their relatives to save taxes under HRA and I'll tell you exactly what is happening. S…