India, Feb. 21 -- Paying rent to parents or close relatives has long been recognised as a legitimate tax-planning strategy, provided the arrangement is genuine and backed by proper documentation. Many salaried employees use such arrangements to legally claim deductions for House Rent Allowance (HRA).

But will the proposed Income Tax Draft Rules, 2026, make such claims illegal? In simple terms, can a salaried employee continue to treat parents, in-laws or even a spouse as a landlord or will such arrangements now attract scrutiny?

The draft rules 2026 introduce a key compliance change by mandating disclosure of the 'relationship with the landlord' in Form No. 124, a move aimed at curbing tax evasion rather than prohibiting genuine rental ...