Form 12BB Is Now Form 124: Declarations and Proofs for 2026-27

Form 12BB is the statement an employee gives their employer to claim house rent allowance, leave travel concession, home loan interest and tax-saving deductions, with evidence, so that tax is deducted from salary on the right figure. For salary paid from 1 April 2026 the same statement is Form No. 124, under rule 205 of the Income-tax Rules, 2026. Form 12BB still applies to tax year 2025-26 and earlier. The purpose is the same, but the form has changed in ways that matter to the payroll team collecting it.

Form 124 asks for the landlord's Aadhaar number and the employee's relationship with the landlord, which Form 12BB never did. It splits the lender's PAN by the type of lender. And it requires four annexures, the first of which is the house rent agreement itself. An employer still running last year's checklist will accept a stack of rent receipts in January that the new form says is incomplete.

This post sets out which form applies to which year, what Form 124 asks for part by part, the evidence each claim needs, the declaration and proof cycle employers run and where it goes wrong, and what the employer is liable for if it allows a claim it should not have. For the definition alone, the glossary entry on Form 12BB is the shorter read.

It is written for whoever runs the investment declaration cycle, which at many smaller companies is an HR manager doing payroll without a finance team behind them. Most employers open the proof window for 2026-27, the first year under Form 124, in December or January.

Nothing here is tax advice. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026, and the Income-tax Rules, 2026 replaced the 1962 Rules on the same date. Section numbers below are from the 2025 Act unless the 1961 Act is named. Check anything unusual with whoever signs off your TDS. The law is stated as at 29 October 2026.

Form 12BB or Form 124: which one applies?

The form follows the tax year in which the salary is paid, not the year in which the employee joined or the year the claim relates to.

For salary paid in tax year 2025-26 and earlier, the governing provision is section 192(2D) of the Income-tax Act, 1961, the statement is Form 12BB, and the rule is rule 26C of the Income-tax Rules, 1962. For salary paid from tax year 2026-27, the governing provision is section 392(5)(b) of the Income-tax Act, 2025, the statement is Form No. 124, and the rule is rule 205 of the Income-tax Rules, 2026. The employer's duty is the same under both: obtain the evidence, proof or particulars of the claims before allowing them in the tax deducted.

The 1961 Act still governs 2025-26 by the savings in section 536(2) of the 2025 Act, so a revision to a 2025-26 TDS computation, or a query from an employee about last year's certificate, is still a Form 12BB matter. Everything for the current year is Form 124.

The renaming has caused more confusion than the substance. Employees search for Form 12BB, find a 1962-format PDF, fill it in and send it. The information on it is still usable, but it is not the prescribed form for 2026-27 and it lacks fields the new one asks for. The practical answer is to accept the information, then ask for what Form 124 adds before the claim is allowed. The tidier answer is to stop sending employees off to find a form at all, and collect the particulars on a screen that maps to Form 124 line by line.

Why does the employer need it?

An employer paying salary deducts tax under section 392(1) on the estimated income of the employee for the whole tax year. Part of that estimate depends on facts only the employee knows: whether they pay rent, hold a housing loan, pay insurance premiums or contribute to a pension scheme. The employer cannot see any of that. The form is how those facts reach payroll in a standard shape, with evidence attached.

Section 392(5)(b) makes the collection an obligation on the employer. The person responsible for paying salary shall, for the purpose of estimating income or computing tax deductible, obtain from the employee the evidence or proof or particulars of prescribed claims in the prescribed form. Rule 205 prescribes the form, Form 124, and sets out in a table the evidence each class of claim needs.

Section 392(5)(c) is the other half. The employer may increase or reduce the deduction during the year to adjust for any excess or shortfall in earlier months. That is the provision behind every February payslip with a tax deduction three times the usual size, and section 8 deals with it.

The form stays with the employer. It is not filed with the Income Tax Department. Its effect reaches the department through the employer's quarterly TDS statements and the salary certificate, Form 130, which replaced Form 16 from 2026-27. That is why the employer has to keep the form and its annexures with the payroll records for the year: if the department questions a deduction the employer allowed, the employer is the one asked to produce the evidence.

What does Form 124 ask for?

Form 124 is short. It has two parts, a declaration and four annexures.

Part A is the employee's details: full name without abbreviations, address in a prescribed structure, PAN, email, contact number with country code, and the tax year.

Part B is the claims, in four rows.

Row 1 is house rent allowance. It asks for the landlord's name, address, PAN, Aadhaar number, the employee's relationship with the landlord if any, and the rent paid to that landlord. The row repeats for each landlord. Note 3 to the form says PAN is to be furnished where the aggregate rent paid during the tax year exceeds one lakh rupees.

Row 2 is leave travel concession or assistance. The form gives it one line, and the evidence goes in the annexure.

Row 3 is deduction of interest on borrowing. It asks for the lender's name and address, the PAN of the lender split three ways, as a financial institution, the employer, or others, and the interest payable or paid. The row repeats for each lender.

Row 4 is deductions under Chapter VIII of the Act. It lists section 123, section 124, section 130 and section 131 by name, and then has space for other sections, giving 129, 133, 137 and 153 as examples. Section 7 of this post maps those numbers to what they cover, because almost nobody filling the form in will recognise them.

The annexures are the change most employers have not absorbed. Note 4 to the form lists them: A-1 is the house rent agreement, A-2 is documents in support of the leave travel claim, A-3 is the loan agreement, and A-4 is documents in support of Chapter VIII deductions. Form 12BB asked for evidence of each claim, but did not list the rent agreement or the loan agreement as required documents. Form 124 does.

The declaration at the end is signed by the employee, with PAN, certifying that the information is complete and correct.

Some of these changes reach beyond the paperwork. Asking for the relationship with the landlord puts the rent-to-a-relative question on the face of the form rather than leaving it for scrutiny. Asking for the landlord's Aadhaar alongside PAN gives the department a second identifier to match. And requiring the loan agreement means an interest certificate from the bank, which used to be enough, is now half the evidence.

What proof is needed for HRA?

House rent allowance is the claim that produces more queries than every other row on the form combined. This post deals with what the employee has to give the employer. The exemption calculation itself, under rule 279 of the 2026 Rules, with its three limits and its list of eight cities at fifty per cent, is a separate exercise, and the HRA calculator runs it.

The evidence threshold is the aggregate rent paid during the tax year. Above ₹1,00,000, the landlord's PAN is required. It is the aggregate across the year that matters, not the monthly figure, so ₹8,500 a month for twelve months, which is ₹1,02,000, needs a PAN, and an employee who moved homes mid-year needs one for each landlord whose share pushes the total over the line. Where the landlord will not share a PAN, the employer cannot allow the claim through payroll. The employee can still claim it in their return, on their own evidence, and take the matter up with the department if it is questioned.

Rent receipts remain the usual evidence of payment, but they are evidence of payment rather than of the tenancy. The rent agreement now required at annexure A-1 is the evidence of the tenancy. Where there is no written agreement, which is common in smaller cities and for rooms let informally, the employer has a choice to make and should make it in writing for everyone: either accept a declaration from the employee and landlord in place of an agreement, on the reasoning that the form lists the annexure without saying what happens when none exists, or decline to allow the claim through payroll and leave it to the return. Both positions are defensible. Applying one to some employees and the other to the rest is not.

The relationship field is where rent to parents surfaces. Rent paid to a parent who owns the home is allowable where the arrangement is real: the parent owns the property, the rent actually moves from the employee's account to the parent's, and the parent reports it as income. A paper arrangement with no money moving is not, and the relationship field now tells the employer to look. Rent paid to a spouse for a home the couple shares is generally not accepted, because the arrangement is hard to show as genuine. The employer is not a tax authority and does not need to adjudicate these, but it should not allow a claim through payroll that the form itself has flagged without seeing the evidence the claim depends on.

House rent allowance is one of the exemptions the default regime withdraws, under section 202(2)(a)(i), which excludes Schedule III Table serial number 11, where the allowance now sits. An employee in the default regime has nothing to claim in row 1, however much rent they pay.

Leave travel: the block, the carry-over and the two-children rule

Leave travel concession is exempt under Schedule III Table serial number 8, on the conditions in rule 278 of the 2026 Rules. The evidence the employer needs under rule 205 is evidence of expenditure, which in practice means tickets, boarding passes and invoices for the journey.

The exemption is limited to the amount actually incurred on travel within India, on the employee's entitled class by the shortest route. For air travel it is the fare for the class the employee is entitled to. Where the places are connected by rail and the journey is made by some other mode, it is capped at the air-conditioned first-class rail fare. Where they are not connected by rail and no recognised public transport exists, rule 278 gives ₹30 a kilometre for the shortest route. Hotels, food and sightseeing are not travel and are not covered.

The block is where employers make mistakes. Rule 278(2) allows two journeys in a block of four calendar years commencing from 2022, so the current block is 2026 to 2029, and the previous one, 2022 to 2025, closed on 31 December 2025. The block runs on calendar years while payroll runs on tax years, so a journey in February 2026 belongs to tax year 2025-26 but to the 2026 to 2029 block. Track journeys by date of travel, not by the tax year the claim was made in.

Rule 278(3) is the carry-over, and most payroll systems do not implement it. Where an employee did not use the concession in a block, a journey first undertaken in the first calendar year of the next block is eligible and does not count against the two journeys of the new block. So an employee who made no claim at all in 2022 to 2025 can take a journey in calendar year 2026 that counts for the old block, and still have two journeys left in 2026 to 2029. That is a real benefit, it applies only in 2026 for this block, and an employee who does not know about it will not ask.

Rule 278(5) limits the exemption to two surviving children, and 278(6) disapplies that limit for children born before 1 October 1998 and for multiple births after the first child. Most employees will never meet these, but the employee with three children claiming tickets for five people is the claim that should be checked against them.

Leave travel concession is also withdrawn in the default regime: section 202(2)(a)(i) excludes Schedule III serial number 8.

Home loan interest and the lender's certificate

Row 3 of Form 124 is interest on borrowing for a house. The deduction itself is under section 22 of the 2025 Act, in computing income from house property, not under Chapter VIII, which is why the form gives it its own row.

For a self-occupied home, section 22(2)(a) caps the deduction for interest at ₹2,00,000 in a tax year, on conditions that include completion of the acquisition or construction within five years from the end of the tax year in which the loan was taken. For a let-out property there is no such cap on interest, but the loss from house property that results can be set off against other income only to a limited extent, and that set-off is a matter for the return rather than for payroll.

The evidence is the lender's interest certificate for the year, which shows principal and interest separately, and, under Form 124, the loan agreement at annexure A-3. The lender's PAN is required. The form splits that field by type: a financial institution, the employer, or others. Where the loan is from the employer itself, payroll already has the PAN. Where it is from a relative or a private lender, the employer should see the agreement and the PAN, and should know that the interest is income in the lender's hands.

Two Chapter VIII deductions sit alongside row 3 and are listed by name in row 4. Section 130 gives an additional deduction of up to ₹50,000 of interest, on conditions including a sanctioned loan of no more than ₹35 lakh and a property value of no more than ₹50 lakh. Section 131 gives up to ₹1,50,000 for an individual not eligible under section 130, where the loan was sanctioned between 1 April 2019 and 31 March 2022, with its own conditions. Both are narrow and dated, both depend on the date of sanction and the value of the house, and the evidence for both is the sanction letter as well as the interest certificate.

In the default regime, interest on a self-occupied home is not deductible. Section 202(2)(a)(v) excludes the section 22(1)(b) deduction for self-occupied property, and section 202(2)(b)(ii) prevents a house property loss being set off against salary.

Chapter VIII deductions: what the new section numbers mean

Row 4 of Form 124 names sections that employees know by their old 1961 numbers, if at all. The mapping matters for the form and for the conversation with the employee who writes "80C" in a field labelled section 123.

The evidence rule in rule 205 for all of these is a single phrase: evidence of investment or expenditure. That puts the judgement on the employer. A premium receipt dated in the tax year, from an insurer, naming the employee or a person whose premium qualifies, is evidence. A screenshot of a policy schedule is not evidence of payment. A statement showing an investment that is not one of the Schedule XV items is evidence of the wrong thing.

Health insurance under section 126 deserves one practical note. Section 126(9) specifies the modes by which the premium has to be paid, so an employer reviewing proofs should check the mode of payment on the receipt, not only the amount.

In the default regime almost all of Chapter VIII goes. Section 202(2)(a)(xii) excludes Chapter VIII other than sections 124(1) and 124(2), section 125(2) and section 146. For a salaried employee that leaves the employer's contribution to the notified pension scheme (NPS) under section 124, and very little else. A default-regime employee who submits a full row 4 has submitted a form with nothing to allow, which is the clearest sign that the regime question was not asked properly. Section 9 deals with it.

The two-stage cycle: declaration, then proof

Most employers run the form in two passes, and almost every complaint about it comes from the gap between them.

The investment declaration comes first, usually in April or May. The employee states what they expect to claim for the year: the rent they will pay, the investments they plan to make, the premiums that will go out. Payroll applies the declaration from the first month, so less tax is deducted from the start instead of being refunded after the year ends. Section 392(5)(b) speaks of evidence or particulars, and the declaration is the particulars stage.

The proof comes later, usually in December or January. The employer asks for evidence: the rent agreement and receipts, premium receipts, the lender's certificate, investment statements, travel documents. A claim that was declared and proven stays. A claim that was declared and not proven is removed. A claim that was proven but not declared is added, though many employers refuse new claims at the proof stage, which the law does not require them to do.

When a claim is removed in January, the tax that was not deducted on it since April has to be recovered from the months that are left, under the adjustment power in section 392(5)(c). Take an employee whose marginal rate is thirty per cent, who declared ₹1,50,000 under section 123 in April and never submitted proof. The claim was worth ₹45,000 of tax before cess, or ₹3,750 a month. By the end of January, ten months have been deducted ₹3,750 short, a total of ₹37,500. Removing the claim adds the full ₹45,000 to the year's tax, and only February and March remain to collect it. Each of those two payslips carries ₹22,500 of additional tax on top of the usual deduction, which the employee reads as a payroll error and which is almost always a missing proof.

What fixes this is communication. Tell employees in the declaration window that the proof deadline is real and what happens if it is missed. Remind them a month before it, and again a week before. And show each employee, on their own payslip or self-service screen, the effect on their remaining months of any proof that is still outstanding, in rupees, before the deadline rather than after. An employee who sees "₹22,500 extra in February and March if this proof is not in by 15 January" submits it.

Setting the proof deadline late in the year reduces the number of months that absorb a reversal, so the spike is worse. Setting it in December rather than late January gives three months to spread the recovery instead of two. The law does not fix the dates. The employer sets them, and the choice is a trade between collecting proofs after the employee has finished making investments and leaving enough months to recover.

There is also a mid-year version of the problem for joiners. An employee who joins in September declares on joining, and their proof window is the same January date as everyone else's. They have four months between declaration and proof rather than nine, which is usually enough, but they also have only three months after January to absorb a reversal.

The regime question comes before the form

The declaration only does anything under the regime that allows the claims, and the regime question has to be answered before the form is worth reading.

Under section 202(1) of the 2025 Act, the default regime applies to an individual unless they exercise the option to opt out. It has lower slab rates and withdraws most exemptions and deductions: house rent allowance, leave travel concession, interest on a self-occupied home, and nearly all of Chapter VIII. An employee in the default regime gets a standard deduction of ₹75,000 under section 19(1) and little else from a declaration. The other regime allows the claims on the form but taxes at higher rates, with a standard deduction of ₹50,000. Our guide to TDS on salary under the old and new regimes sets out the slabs and the comparison.

For a salaried employee with no business income, the binding choice is made with the return of income, under section 202(4)(b). The choice given to the employer during the year governs only how much tax is deducted. An employee who tells payroll they want the old regime and then files under the default regime, or the other way round, settles the difference with the department, not with the employer. The Act does not prescribe a form in which the employee tells the employer, so employers collect it alongside the declaration.

That creates the most common failure in the cycle. Because the default applies when an employee records no choice, an employee who submits a full declaration with rent receipts but never confirms their regime can find none of it applied. Collect the regime choice and the declaration on the same screen, make the regime field mandatory, and say plainly that submitting a declaration does not by itself select a regime. Then show the employee the projected tax under both, using their own declared figures. Our TDS calculator does the comparison for a single case.

What is the employer liable for?

If the employer allows a claim without the evidence behind it, and tax is deducted short as a result, the shortfall is its problem as well as the employee's.

Section 398(1) of the 2025 Act deems an employer that does not deduct the whole or any part of the tax required to be an assessee in default in respect of that tax. Section 398(3)(a) adds simple interest at one per cent for every month or part of a month from the date the tax was deductible to the date it is actually deducted, and one and a half per cent a month from the date of deduction to the date of payment where tax was deducted but not paid over. Section 398(2) gives relief from the assessee-in-default status where the employee has filed a return, included the income and paid the tax on it, and the employer obtains a certificate to that effect from an accountant. The interest still runs to the date of the employee's return.

In practice these steps belong on the same payroll compliance checklist as the TDS deposit dates. Collect the form and the evidence, and keep both with the payroll records for the year, in a form you can produce for a named employee without searching an inbox. Check the PAN requirements where aggregate rent or the loan calls for them, and do not allow the claim through payroll where a required PAN is missing. Reverse unproven claims within the year, rather than carrying them into the certificate. And make sure the exemptions and deductions on the employee's Form 130 are exactly those that were allowed and evidenced, because the certificate is the employer's statement of what it allowed and why.

The employer is expected to take reasonable care, and is not expected to investigate. An employer that has seen a rent agreement, receipts and a PAN, and allowed a claim on them, has done what section 392(5)(b) asks, even if the arrangement later turns out to be artificial. An employer that allowed a claim on a declaration alone, in a year it asked for proof from everyone else, has not.

Running the cycle without spreadsheets

Collecting declarations by email and proofs as attachments works for twenty employees. Past fifty it is where the cycle breaks, and the break is always in the same place: nobody can say, for a given employee on a given day, which claims are declared, which are proven, which are rejected and why, and what that does to the remaining months.

In a cycle that works, declarations are entered on a screen that maps to Form 124 row by row, so the particulars the form needs are captured at source rather than reconstructed in January. Proofs are uploaded against the specific claim they support, not as a folder of attachments. Each proof has a status and a reviewer, so rejections are recorded with a reason. Every change in status recomputes the employee's projected tax and shows the effect on the remaining months. And the final allowed figures flow into Form 130 without being retyped.

That is the difference between a payroll system that treats declarations as an input to TDS and one that treats them as a separate process feeding a spreadsheet. If your current process involves exporting declarations to Excel to compute the tax impact, our piece on Excel payroll against payroll software covers where that approach stops scaling.

Form 12BB and Form 124 questions

Is Form 12BB mandatory?

An employee who wants exemptions or deductions taken into account in the tax deducted from their salary has to give the employer the evidence or particulars in the prescribed form, which for 2026-27 is Form 124. An employee who claims nothing, or who is in the default regime and has nothing the regime allows, need not submit one. Not submitting does not forfeit the deduction. The employee can still claim any eligible deduction in their return of income, on their own evidence, and receive the excess tax as a refund.

What is the new name of Form 12BB?

From tax year 2026-27 the statement is Form No. 124, prescribed by rule 205 of the Income-tax Rules, 2026 under section 392(5)(b) of the Income-tax Act, 2025. Form 12BB, under rule 26C of the 1962 Rules, still applies to tax year 2025-26 and earlier. The new form covers the same four heads, house rent, leave travel, interest on borrowing and Chapter VIII deductions, and adds the landlord's Aadhaar, the relationship with the landlord, a split of the lender's PAN by type, and four annexures including the rent agreement and the loan agreement.

When should Form 124 be submitted?

The law does not fix dates. Most employers collect the declaration in April or May, or at joining for new employees, and the proof in December or January. The employer sets the dates so that the remaining months of the year can absorb any change in tax. An earlier proof deadline spreads a reversal over more months and produces a smaller spike. A later one gives employees more time to make investments but leaves fewer months to recover the tax if a proof is missing.

What happens if proofs are not submitted?

The claim is removed from the employee's tax computation, and the tax not deducted on it in earlier months is recovered from the months that remain, under section 392(5)(c). For an employee with a large unproven claim and a January deadline, the February and March deductions can be several times the usual amount. The employee loses nothing permanently: if they have the evidence, they can claim the deduction in their return and receive the excess deduction back as a refund.

Is Form 124 needed under the new tax regime?

Largely no. The default regime under section 202 withdraws house rent allowance, leave travel concession, interest on a self-occupied home and almost all of Chapter VIII, so there is little to declare. The employer's contribution to the notified pension scheme under section 124 survives, but the employer already knows about that. What the employee does need to give the employer is their regime choice, because the default applies when no choice is recorded, and a full declaration does nothing if the regime field is blank.

Is the landlord's PAN required for HRA?

Where the aggregate rent paid during the tax year exceeds ₹1,00,000, yes. Rule 205(2) requires the name, address and PAN of the landlord above that figure, and Note 3 to Form 124 says the same. The test is the year's total, not the monthly rent, and it applies to each landlord. Where the landlord will not share a PAN, the employer should not allow the claim through payroll. The employee can still claim the exemption in their return.

Does Form 124 go to the Income Tax Department?

No. It stays with the employer, who uses it to estimate the employee's income and compute tax, and keeps it with the payroll records for the year. The figures it supports reach the department through the employer's quarterly TDS statements and the employee's salary certificate, Form 130. If the department questions a deduction the employer allowed, the employer is expected to produce the form and its annexures.

Can the employer reject a proof the employee has submitted?

Yes, where it is not evidence of the claim. Rule 205 requires evidence of investment or expenditure, and a document that does not show payment in the tax year, or shows payment for something that does not qualify, is not that evidence. The employer should record a reason for each rejection and tell the employee in time for them to submit something better. A rejected proof does not stop the employee claiming the deduction in their return if they believe it qualifies.

Before the proof window opens

Do these in order, and finish them before the proof window for the first Form 124 year opens, which for most employers is December.

Update the proof checklist to Form 124. Add the rent agreement and the loan agreement as required documents, add the landlord's Aadhaar and the relationship field, and split lender PAN by type. Tell employees now, not in January, so the ones without a written rent agreement have time to get one.

Then decide, in writing, what you will accept where an annexure does not exist, and apply it to everyone.

Then check the regime field for every employee who submitted a declaration. Anyone with a declaration and no recorded regime is about to have a surprise. Ask them now.

Then set the proof deadline early enough to spread a reversal over three months, and send each employee their own outstanding-proof figure in rupees a month before it.

Then make sure the allowed figures flow into Form 130 without being retyped.

If the cycle runs on email and spreadsheets, our payroll software collects declarations on a screen that maps to Form 124, takes proofs against each claim, recomputes TDS as each proof is approved or rejected and shows the employee the effect on their remaining months, and the pricing is published rather than quoted. For a single employee's numbers, the TDS calculator and the HRA calculator do the arithmetic.

Related reading: TDS on salary under the old and new regimes, salary allowances explained, and how to calculate payroll in India.

Sources

• Income-tax Act, 2025, Gazette of India. Section 392(1) and (5)(b) and (c), on deduction from salary and the evidence of claims; section 398, on consequences of failure to deduct; section 202, on the default regime and the option to opt out; section 19(1), on the standard deduction; section 22(2), on interest for self-occupied property; sections 123, 124, 126, 129, 130, 131 and 133 of Chapter VIII; section 536(2), on the savings for the repealed Act.

• Income-tax Rules, 2026, Income Tax Department. Rule 205 and Form No. 124, on the evidence and particulars of claims; rule 278, on leave travel concession; rule 279, on house rent allowance.

• Income-tax Act, 1961, section 192(2D), and Income-tax Rules, 1962, rule 26C and Form 12BB, for tax year 2025-26 and earlier.

Nothing above is tax advice. The worked example in section 8 uses an illustrative marginal rate and ignores cess and surcharge.