Tax planning 2026: Claiming HRA without rent agreement? Here’s what proofs you need to stay tax compliant

House Rent Allowance (HRA) is one of the most widely used tax-saving components in a salaried employee’s pay structure, yet it is also among the most misunderstood. While many assume that the entire HRA received is tax-free, the reality is more nuanced. Under Section 10(13A) of the Income Tax Act, only a portion of HRA qualifies for exemption, depending on salary, rent paid and city of residence. Still, for employees living in rented accommodation, it remains a powerful tool to reduce taxable income—provided the rules are followed carefully.

HRA is a widely claimed tax break, but many employees wrongly assume the full amount is exempt. One of the most common questions taxpayers ask every year is whether a rent agreement or rent receipt is mandatory to claim HRA. The short answer is: not always. If your annual rent is below Rs 36,000 (or Rs 3,000 a month), you can claim HRA without submitting rent receipts or your landlord’s PAN. Beyond this threshold, however, documentation becomes important—not necessarily in the form of a legal agreement, but as proof that rent has actually been paid.

Tax expert CA Ruchita Vaghani said contrary to popular belief, the Income Tax Act does not require a formal rent agreement for claiming HRA. What it does require is evidence of payment. This can include rent receipts, bank statements, UPI transfers, cheques or NEFT records. These documents are sufficient to establish the legitimacy of your claim. For employees whose annual rent exceeds Rs 1 lakh, providing the PAN of the landlord to the employer becomes mandatory. If the landlord refuses to share PAN, the tenant must submit Form 10BA, explaining the reason for non-availability.

Another area that often causes confusion is paying rent to parents. Yes, this is allowed under tax law—but only if the arrangement is genuine. Rent must be paid through banking channels, and parents must declare the rental income in their own income tax returns. Any attempt to create artificial arrangements, where money circles back to the employee, can trigger scrutiny.

What is strictly not allowed is claiming HRA for a house that you own and live in. Since HRA is meant to offset rental expenses, there is no exemption if you are staying in your own property. Similarly, claiming both HRA and home loan interest for the same house is a major red flag. This combination is permitted only if the owned property is in another city and the taxpayer is genuinely living on rent elsewhere.

It is also important to remember that employer approval does not guarantee tax immunity. Many companies allow HRA claims based on declarations during the year, but the Income Tax Department can still ask for proof later. This makes record-keeping essential. Rent receipts and digital payment trails should be preserved even if they were not demanded at the time of filing.

Tax professionals strongly advise avoiding cash rent payments altogether. Digital transfers leave a clear audit trail, making it far easier to defend your claim in case of verification. In today’s compliance-driven environment, a bank statement is often stronger proof than a signed receipt.

In essence, HRA remains one of the most effective tax-saving tools for salaried individuals—but only when used correctly. A rent agreement may not be mandatory, but proof of rent payment always is. Understanding the conditions under which HRA is exempt, maintaining proper documentation and ensuring genuine transactions can help taxpayers enjoy the benefit without risking future disputes with the tax authorities.