Salaried individuals often receive a house rent allowance (HRA) as part of their salary package. This allowance can be used to claim tax deductions if one is living in rented accommodation.
But what about those who reside with their parents? It’s possible to still benefit from HRA by paying rent to your parents.
Understanding HRA Claims When Living with Parents
The Income Tax Act allows for HRA exemption on rent paid to parents, given certain conditions are met.
Consider the case of Suraj, a 20-year-old from Saket, New Delhi. He commutes to his job in Gurgaon and lives with his parents. When it’s time to declare tax-saving deductions, Suraj learns that he could claim HRA by paying rent to his parents.
Calculating HRA Exemption
Using an HRA calculator, Suraj can determine the exempt portion of HRA by paying his father Rs 12,000 monthly. This rent becomes part of his father’s taxable income, which also includes interest income. The family can realize a total tax saving by this arrangement.
Addressing Common Queries
Even if rent receipts are not submitted in time, HRA exemptions can be claimed while filing income tax returns. It’s important to keep rent receipts and the rental agreement for future reference.
In cases where one’s spouse is the sole owner of the house and has an income, it’s permissible to claim a deduction for rent paid to them.