While a formal rent agreement is not a legal prerequisite, Tax planning 2026: digital payment trails and landlord PAN details are essential to withstand tax department’s scrutiny
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Tax planning 2026: Claiming HRA without rent agreement? know the process
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Claiming tax rebate on house rent allowance (HRA) is a key component of tax planning but many salaried employees are often confused whether a formal rent agreement is necessary. Understanding the documents required will help you comply with the rules and get tax benefits.
Contrary to popular belief, a formal rent agreement is not mandatory under the Income Tax Act to claim HRA. “The Income Tax Act does not make rent agreement compulsory for claiming HRA. But you must have proof that rent was actually paid to the landlord,” said Ruchita Vaghani, a chartered accountant, in a post on X.
Proof of rent payment
According to Vaghani, even without a rent agreement, employees can substantiate their HRA claims through:
- Rent receipts
- Online or bank payment records such as IMPS, UPI, NEFT, or cheque transfers
- Landlord’s name and PAN, if annual rent exceeds Rs 100,000
“These proofs are sufficient to justify your HRA claim,” Vaghani said. If an annual rent payment is more than Rs 100,000 and the landlord refuses to provide their PAN, the taxpayer must submit Form 10BA explaining the reason.
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Paying rent to family members
Taxpayers can pay rent to parents and still claim HRA but only if the arrangement is genuine. Rent must be paid through banking channels and the parents must report it as income in their tax returns, said Vaghani. Any circular transactions designed to artificially claim HRA are strictly prohibited.
Restrictions
HRA cannot be claimed if you live in a house you own. Claiming both HRA and home loan interest for the same property is legally fraught unless the house is in a different city and you live in a rented accommodation elsewhere, said Vaghani.
If your employer vouches for the HRA based on your declaration, the Income Tax Department may ask for proof. Maintaining rent receipts and digital payment records is therefore crucial. Vaghani recommended avoiding cash payments, as bank or digital transfers provide a stronger audit trail.
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Key Takeaways
Rent agreement: Not mandatory
Rent receipts: Required
Bank or digital payment proof: Required
Landlord PAN (if rent is above Rs 100,000/year): Required
By understanding these rules and maintaining proper documentation, salaried individuals can continue to benefit from HRA while staying compliant. As Vaghani summarised: “You can claim HRA without a rent agreement, but you must prove actual rent payment.”
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