Old Tax Regime 2026: From April 1, HRA claims get stricter for taxpayers; here's how

House Rent Allowance (HRA) remains the biggest reason many salaried taxpayers continue to stay in the old tax regime, but from April 1, 2026, claiming HRA exemption may become more difficult due to stricter disclosure rules and digital verification, according to Chartered Accountant Nitin Kaushik.

The new Income Tax Rules 2026, effective from April 1 for FY 2026-27, introduce tighter reporting requirements, expand the list of cities eligible for higher exemption, and add what experts call a “digital filter” that can flag incorrect HRA claims during return processing.

Old regime and HRA claims

CA Nitin Kaushik said the old tax regime is still relevant mainly for one reason — HRA exemption.

Under the new tax regime, HRA deduction is not allowed, which makes the old regime more beneficial for salaried employees who pay high rent.

However, Kaushik cautioned that many taxpayers claim HRA incorrectly, especially when paying rent to family members without proper documentation.

He said that under the 2026 rules, such claims may not pass automated scrutiny.

“If you are claiming HRA for a flat owned by your spouse or parents without a formal, market-rate agreement, you are not optimising tax — you are flagging your return for immediate scrutiny under the new related-party disclosure rules,” he said.

Relationship with landlord

One of the biggest changes in the Income Tax Rules 2026 is mandatory disclosure of landlord details.

Taxpayers claiming HRA must now provide:

Name of landlord
Address
PAN of landlord if rent exceeds ₹1 lakh per year
Relationship with landlord, if any

Earlier, many employees submitted only rent receipts or PAN details, but the new rules require explicit disclosure in the updated declaration form similar to revised Form 12BB.

According to Kaushik, this creates a digital cross-check between tenant and landlord tax returns.

“If you show rent paid, the landlord must show rental income. The system will match both PANs automatically,” he said.

Metro expansion under HRA rules

The 2026 rules also increase the HRA exemption limit for more cities.

Earlier, only four metro cities qualified for the 50% of basic salary limit:

Delhi
Mumbai
Chennai
Kolkata

From April 1, 2026, four more cities are added:

Bengaluru
Pune
Hyderabad
Ahmedabad

This means employees in these eight cities can claim up to 50% of basic salary as part of HRA calculation instead of 40%.

Kaushik said this change will benefit employees in technology and corporate hubs where rent levels are high.

HRA calculation still based...

The exemption continues to be calculated using the lowest of three values:

Actual HRA received
Rent paid minus 10% of basic salary
50% of basic salary in metro cities (40% in others)

Kaushik noted that many taxpayers fail to optimise HRA because their rent is too low compared to salary.

“If your rent is not at least 30–40% of your basic salary, your exemption automatically reduces,” he said.

Digital filter makes HRA claims riskier in 2026

Kaushik said the biggest change in 2026 is the automated verification system used while processing returns.

Taxpayers claiming HRA should now maintain:

Proper rent agreement
Digital payment proof
Correct landlord PAN
Genuine rental transactions

“HRA is no longer a set-and-forget deduction. In 2026, every claim is verified digitally before refund is issued,” he said.

Experts say the old tax regime will continue to attract salaried taxpayers, but only those with genuine rent payments and proper documentation will be able to safely claim HRA exemption under the new rules.