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Pay Rent to Your Parents and Save Tax

Save Tax
Save Tax

Not many people are aware that if they are staying in their parents house then they can pay rent to their parents and save tax. I briefly covered this point in my post Tax Benefits on HRA – House Rent Allowance. Its a comprehensive topic as it involve lot of ifs and buts. As it help to save tax, it doesn’t mean we can blindly follow this rule related to HRA. It require financial impact study i.e. whether paying rent to parents will actually help to save tax or not on net basis. Sometimes due to ignorance of finance team of employer, HRA exemption is rejected specially in case rent is paid to parents. Employee gets frustrated as it increases tax outflow towards the end of FY. In my opinion, the two major concerns of any salaried employee is Performance at work place and how to Save Tax. Recently i received many queries regarding how to claim HRA exemption and save tax by paying rent to parents. I thought of writing separate post on this topic. We will discuss all such queries and issues faced by the employee.

One of my client Sunil Kadam is staying in his parents house along with his family in Vashi, Navi Mumbai. His office is in Bandra Kurla Complex, Mumbai. He claimed HRA deduction u/s 10(13A) but finance department rejected HRA exemption. He approached me how he can save tax else his employer will deduct tax on HRA exemption claimed from April’14 to Jan’15 in Feb’15 and Mar’15 salary. When i checked the details i observed that Sunil was paying rent to his mother whereas property was registered in the name of his father. The finance department was right in rejecting the HRA exemption. I suggested him to invest in PPF and ELSS to save tax as this issue cannot be addressed for current FY.

As next FY is approaching therefore it is important to take care of following points if you wish to save tax by paying rent to your parents & claim HRA exemption.

Save Tax – Points to consider while paying rent to parents

(a) Property should be in Parent/s name:  Now it is imp to note that you can save tax only if you are paying rent to parent/s who is owner of the property. If the property is jointly held by your father and mother then you should pay rent to both of them. Please note that this rule is only for parents. Rent paid to spouse does not qualify for HRA exemption. Reason being, as per income tax department you are suppose to stay with your spouse. In short, you cannot save tax if you are paying rent to your spouse. Needless to say, if you are saying in own house i.e. self occupied then you cannot claim HRA exemption. Another common query is that person has own house in same city whereas he is staying in his parents house. In this case, he claim HRA by paying rent to his parents and declare his own house as let out property.

(b) Rental Income is taxable: Another very common misconception. If your mother is working and you are paying rent to her in order to save tax. This rental income is taxable in her hands. She has to include it in her income and pay tax accordingly. She can claim 30% of the annual rent as deduction for maintenance expense like repairs etc. Now you must be wondering how this arrangement help to save tax. As i explained initially that this arrangement is not beneficial always. In following points i will discuss under what conditions it is financially beneficial.

(c) Income Tax Slab of parents: If your parents are retired and they do not have any other source of income then you can save tax on net basis. In short, as a family you can save tax. In another scenario, if you are in 30% tax bracket but your working parents are in 10% income tax bracket then also it is beneficial on net basis. From family perspective, tax on rental value will be 10% instead of 30% thus you will save tax to the extent of 20% on rental value. Best possible scenario is when parents house is in joint name or they don’t have any other income source. In this case, income will be exempted till basic limit. The best part is you can decide how much rent you will pay to your parents provided rent is justified. It will help to save tax till optimum point.

(d) Documentation: In order to avoid rejection of HRA exemption by your employer, it is important to complete documentation related to HRA to save tax. You should sign rental / leave and license agreement with your parents if rent paid per month is more than Rs 8,333/=. You should pay rent through cheque and don’t forget to take rent receipts for rent paid. It will make HRA exemption fool proof. You may submit all documents with your employer to claim HRA exemption.

(e) Distance between work place and Parents House: I received many queries wherein employee is staying in temporary accommodation in Metro city (Work Place) during weekdays & Parents are staying 100 – 150 kms away. An employee is paying rent to parents as his family is staying with the parents in his home town. Lets take case of Mr. Raju, he is working in Delhi and his family is staying with his parents in Karnal (Haryana) which is approx 130 Kms from delhi. He cannot travel on daily basis from Karnal to Delhi. He asked me whether he can claim HRA or not as he is paying rent to his parents. Now to be very honest, it is very subjective whether HRA can be claimed or not to save tax. Only suggestion from my side is that if you can prove that it is possible to travel daily from parents house to work place then you can claim HRA exemption on rent paid to parents. In my opinion, distance of upto 100 Kms is justifiable but you cannot justify distance of 150 – 200 Kms. When you are claiming HRA exemption it is assumed that you are also staying at same place. It is peculiar situation but to save tax, you should have valid justification.

Remember that you should save tax only through logical and transparent way. Any discrepancy in tax details may invite heavy penalty from income tax department. It is always advisable to consult tax consultant before claiming any tax exemption.

Copyright © Nitin Bhatia. All Rights Reserved.

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Anish
Anish
9 years ago

Hi Nitin,

Consider you are in 20% tax bracket and gave your house on rent to some one .Can we deduct the same like 30% as maintanance charge and show only the remaining 70% as rent received for It ? I this case what is the income from property for IT returns 100 % or 70% of rent ?

Also in apartments case we pay montly some amount (Around 2000) as maintenance change. Do we need to include this in rent as actually the money does not come to us

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Anish

In case of let out property also you can claim this deduction. Please check my following post

https://www.nitinbhatia.in/personal-finance/income-from-house-property/

Maintenance charges if part of rent then you should include in your income else best solution is to ask tenant to pay directly to the association.

Anish
Anish
9 years ago
Reply to  Nitin Bhatia

Thanks Nitin

jaygovind
jaygovind
8 years ago
Reply to  Nitin Bhatia

Dear Nitin
If i am paying rent to my parents & for the claiming same is it mandatory to have

1. rent agreement at starting of Financial Year
2. rent should to paid Monthly or yearly (please Specify) ?
3. rent to be paid to cross cheque in name of parents ?
4. Rent receipt along with revenue stamp signed (monthly Or yearly plz specify)

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  jaygovind

1. Yes depending on rent amount
2. Monthly or if it lease then yearly is ok
3. Yes
4. Depends on point no 2.

Shankar Subramaniam
Shankar Subramaniam
8 years ago

is it mandatory to register the agreement, My company is asking for a registered agreement

Nitin Bhatia
Nitin Bhatia
8 years ago

Not necessary. It is as per rules and regulation of IT Act i.e. will be treated like any other rent agreement.

Shankar Subramaniam
Shankar Subramaniam
8 years ago
Reply to  Nitin Bhatia

my problem is, the place i have been staying is my permanent address and belongs to my mother, my wife has of course shown this as her permanent address.

from this year she has started paying the rent to her mother in law and taking the receipt,

The company is a PSU and they insist
1 they need a registered agreement and
2 the permanent address should not be the address for which the rent is being paid,

Nitin Bhatia
Nitin Bhatia
8 years ago

I do understand but there is no such rule that permanent address and rental address cannot be same. You can challenge the same. It is perfectly legal to pay rent to your parents and staying in same house.

Only issue in your case is that either you or your wife can pay rent and claim tax deduction on HRA. As per law, husband and wife are suppose to stay together therefore both cannot pay separate rent and claim HRA.

satya narayana
satya narayana
8 years ago

I am staying with in my cousin house. it is a rent house for 10,000. since I am staying with him,I pay 5000 to my cousin as rent. can i clam this for HRA?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  satya narayana

You have not mentioned, rent agreement is in whose name.

satya narayana
satya narayana
8 years ago
Reply to  Nitin Bhatia

it is in the name of my cousine.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  satya narayana

You cannot claim HRA

AJAY TRIPATHI
AJAY TRIPATHI
8 years ago

Got possession of flat in more than 3 years. What to do to get tax benifit???

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  AJAY TRIPATHI

Please let me know the status i.e. property is self occupied or let out.

AJAY TRIPATHI
AJAY TRIPATHI
8 years ago
Reply to  Nitin Bhatia

Sir,
it is self occupied….

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  AJAY TRIPATHI

Unfortunately, you cannot claim more than Rs 30,000 u/s 80C.

Nitin Bhatia
Nitin Bhatia
8 years ago

As i understand, property is still not transferred in your grand mother’s name. Therefore, you cannot claim HRA.

Abishek
Abishek
8 years ago

My father and I are joint owner in house I am paying EMI claming tax on it . My farther has Done Half payment of property . can i claim HRA by paying him rent . Father is showing rent income in his ITR?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Abishek

As you are joint owner therefore you cannot pay rent for owned property and claim HRA.

Amit
Amit
8 years ago

Hi Nitin,

I am trying to claim a rent of Rs 8000/- per month paid to my father. Now is it necessary to create a rental agreement on Stamp paper of Rs 500 or an affidavit is fine.

Thanks,
Amit

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Amit

You should sign rental agreement with your father.

Deepak Bisht
Deepak Bisht
8 years ago

Hi Nitin,

I am staying with my parents in my house, house is owned jointly by mother and wife. Also house loan is in name of me, my mother and my wife. Can I still show that I am paying rent to my mother?? Also my wife is not claiming any HRA.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Deepak Bisht

No. As your wife is co-owner & as per law husband and wife are supposed to stay together therefore you cannot claim HRA.

Vinayan
Vinayan
8 years ago

Hi Nitin,

Your article is very much informative.
I have two doubts related to rent paid to parents.
1.. I am staying in a metro and my spouse and kid are staying with my parents in another state almost 700km away. I m traveling every weekend to them. Is it possible to get the tax benefit for both these rents assuming that I am paying rent to my parents as my family is staying with them?
2.. I am paying Rs 10000 monthly to my parents to meet their needs. My father has got pension income as well. Is there any way share my tax burden with him other than rent paid to him.

Thanking you,
Vinay

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Vinayan

1. You cannot claim HRA in this case
2. I don’t think so

Himanshu Makkar
Himanshu Makkar
8 years ago

sir,
I am living with my mother. house is in her name. I pay her not by cheque but by making transaction for her electricity bill, water bill, landline telephone etc. I dont have rent agreement but i have got rent receipt with revenue stamp on it. she is also already showing rental income of amount above the amount paid by me.
can i claim exemption

Nitin Bhatia
Nitin Bhatia
8 years ago

You cannot claim HRA exemption. It is advisable to sign rent agreement and pay the rent through cheque in the name of your mother then only you can claim HRA.

Sunrise
Sunrise
8 years ago

sir,
my parental house(in NCR, non-metro) is solely on my mother name and she has no income. my father receives pension and files returns every year. both my parents and my wife/child live here and am myself staying at a different place. Am showing my parents house as my current residence(~55km from office).
for this year, am paying my mother rent of 50k every month through cheques but have not signed any rent agreement. i am collecting rent receipts for same and submitting to my employer.
(1) is this ok?
(2) in point 3 above, u mentioned “provided rent is justified” – how can i find the justified limit? from HRA calculation perspective, this rent amount allows me to claim the max amount that my employer allows me as HRA component (min of those 3 points considered for HRA).
(3) Also, i was planning to file my mother’s return for this year and submit eligible tax as she would fall in 10% bracket after showing 80c savings. Should I claim the 30% as maintenance expenses in her return and pay the tax considering her income as only 70% of rent paid to her?
Above arrangement allows me to save a net 20% tax on the family income.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sunrise

1. A rent of 50k sounds quite illogical for non-metro city. The rent paid should be as per market value. Secondly, it is taxable in your mother’s hand. You can sign rent agreement with today’s date but effective from 1st April, 2015. You can claim HRA based on lease deed provided there is clear cut mention of lease amount for each financial year.
2. As i shared in point 1, a rent of 50k is not justifiable. If you are in 30% tax bracket then you can fix the rent amount in such a way that overall tax liability from family perspective is reduced. You can check the rent of nearby properties and fix as per market value.
3. Yes but subject to certain conditions.

Vinay
Vinay
8 years ago

Hi Nitin,

I have a query.

In a particular case , a NRI owns two apartments in a metro city which have been given for rental at the rate of 12000 Rs each per month.
1. Is this income of 2,88,000 Rs per year is taxable? If so, what will be the tax amount assuming that he does not has any other income from India
2.If the person reduce the rent of his apartments to 10000 Rs each ( ie 240000 Rs per annum), whether he has to file the ITR?

Thanking you in Advance

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Vinay

I don’t think so that taxable rental income will be more than 2.5L. You can claim 30% standard deduction on repair and maintenance and Municipal taxes paid. Please check my following post for more details.

https://www.nitinbhatia.in/personal-finance/income-from-house-property/

If the gross total income exceeds 2.5L then you need to file ITR.

Kirik
Kirik
8 years ago

Dear Sir,

I have taken a home loan and have self occupied one floor of the property and letout another floor of the property to a tenant. My Father has another property in the same city where I stay which doesn’t have any home loan obligation. Can I pay rent to my father and show my residence as my father’s house and claim HRA? Second, can I show the property on which there is home loan and am paying interest and claim the complete interest paid u/s 24 and the principal amount paid u/s 80C?

Will there be a issue since both the properties are in the same city? What caution I need to take and documents I have to show to my employer to claim tax benefits for both HRA and interest paid on let out property?

saurabh
saurabh
8 years ago

Hi Nitin,

I live with my mother in Delhi. The rent agreement is bw the landlord and my mother. I have been paying the rent. Can I get another agreement bw me and my mother (stating that my mother has sub-let the property to me) and subsequently claim rebate in IT under rent part

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  saurabh

You need to check whether sub letting is allowed in delhi or not. Even if it is allowed still you cannot claim HRA as the rent is not paid to the owner. The basic condition is that rent should be paid to the owner. You can execute fresh agreement with owner in your name to claim HRA.

suri
suri
8 years ago

Hi I am staying in hyderabad with my wife my parents staying in vijayawada i am sending 10000 per month for their personal needs how can i save my tax

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  suri

You cannot save tax on this amount.

Sreekanth
Sreekanth
8 years ago

Im staying in a rented house along with my parents. My rented house is in my fathers name.he is a retired employee drawing a person of 2000rs. So im paying house rent of rs 6500rs. Can i claim hra exemption on that.

Sreekanth
Sreekanth
8 years ago
Reply to  Sreekanth

I meant drawing a pension of rs 2000 per month.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sreekanth

You can claim HRA.

Sandesh Bangera
Sandesh Bangera
8 years ago
Reply to  Nitin Bhatia

I have a similar scenario, where my father is retired and my monthly hra component is 8200, so can i claim, the entire monthly hra component?? Also is it a mandate to have the L&L agreement between me and my father?? And lastly, can i pay cash to my father against it and create receipts for it to showcase??

Nitin Bhatia
Nitin Bhatia
8 years ago

You can claim HRA as per calculation shared in my post on HRA. As the rent paid is less than Rs 8333 per month therefore L&L agreement is not must but it is advisable to sign the same. You should pay through cheque and take rent receipt.

Shrenik Jain
Shrenik Jain
8 years ago

Hi Nitin,

I bought house in mumbai wherein I and my mother jointly invest & bought this property. She invest 50% of the amount from her saving and I paid 50% through home loan which was jointly in the name of myself and mother. However EMI applicability is only on me.

Now I with my family stay in this house and my mother & father stay in their home town property (different city). Considering above would like to know if I can claim HRA by paying rent to my mother as part rent of that property along with home loan benefits (Principal & Interest). If yes then is there any circular to support this.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Shrenik Jain

You cannot claim HRA as you are co-owner of the property.

Aditya
Aditya
8 years ago

HI,

I pay rent in Cash to my mother. House is in mother’s name. I have rent receipts with revenue stamp. Can I claim HRA or is cheque deposit compulsory

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Aditya

It should be paid through cheque.

Sanjay Vekariya
Sanjay Vekariya
8 years ago

Sir,
I stay with my family and house is in name of my father and brother name my question is,,
1) can i claim HRA ?
2) Leave and License agreement should be compulsory registration required or not?
3) house in joint name can i prepare agreement between me and only my father and not brother?
4) if i pay cash as rent can it be required revenue stamp compulsory to put?
5) agreement can it be prepare for 2 years?

Nitin Bhatia
Nitin Bhatia
8 years ago

1. Yes
2. It depends on rental value
3. Agreement should be in joint name
4. Pay through cheque
5. Yes or you can take it on lease for long duration

Gargi Roy
Gargi Roy
8 years ago

I’m working in Hyd, own house property. However I would be taking up a space in kolkata for my retired parents to stay and I will be paying the rent. Can I claim HRA for the rent I would be paying for my parents?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Gargi Roy

You cannot claim HRA.

Linoj Skanem
Linoj Skanem
8 years ago

Nitin ji,
Good evening to you. ..my company has computed my salary where you have heads like uniform allowance, helper allowance and driver allowance. ..these are non taxable if i produce receipts against this. Is this accepted exemptions as of date and if yes does it have a monthly cap.

anil vashisht
anil vashisht
8 years ago

Hi Nitin,

I have a house in Rohtak in my name and my parents are living in it and paying me the rent. Can I claim this house as rented and claim deduction in Home loan interest (as part of loss on Property)?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  anil vashisht

I am assuming the property is on home loan. Secondly, you have not mentioned where do you stay and where is your work place.

indira
indira
8 years ago

Dear Sir, My father had taken a house on 2 year lease and pays appox 25k monthly and the agreement is registered one. He pays the rent by cheque.

whether I make L&L with my father and pay him by cheque a rent of say Rs 75k monthly and claim HRA rebate. The differential amount i.e. 75 k – 25 k = Rs 50 k , say Rs 6 Lac he can show as other income in his return being subletting income. Whether this transaction is allowable in inocme tax law. Whether the L&L agreement bitween my father and me should be registered one.

Pl suggest,

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  indira

You cannot claim HRA as your father is not the owner of the property.

Bhagyashree Bhogle
Bhagyashree Bhogle
8 years ago

hello sir my name is Bhagyashree I’m working as a cabin crew some of my friend once GA e me a suggestion for saving tax I can pay rent to my parents as I’m staying with them. in the above review you said if rental amount is exceeding 8300 then to pay our parents by cheque but in my case I was planning to show the rent around 7000 so I wanted to know even then I will have pay them by chequered and get the recipit from my parents? my parents are retired but they have other HOUSE’S rental amount as a income and few of their fd but I asked them even if they will show this rental amount as income they won’t come into slab of paying income. so I wasn’t personally planning to pay the rent but only for the sake of saving tax I’m planning show it on papers. so can you please help me and tell me how I can go about it. and can I save tax on the payment of electricity bill?

Nitin Bhatia
Nitin Bhatia
8 years ago

You can claim HRA if you pay through cheque. I am assuming that house is owned by your parents.

Kapil Jaswani
Kapil Jaswani
8 years ago

awesome post.. Thanks for info. I will refer your blog to my accouts department as they are not agreeing with the rental receipt provided from my side which is given by may parents

Ravi
Ravi
8 years ago

Dear Nithin,

I would like to know about House Rent Allowance exemption against rent paid to parents, the said property is owned jointly by my parents with equal ownership.

I am working in MNC, and do receive HRA from my employer. I am married and live in house which is owned by my parents. We have made 11 months rent agreements signed on Rs. 100 non judicial stamp paper and attested by notery Gazette office. I do pay rent of Rs. 8000/- pm via cheque to my parents. They understand their tax liability and ready to show proportionally in their IT return under head of income for house property.

I have a following questions with regards to above:

Q1. Is it a right way to claim HRA as per income tax act?

Q2. Is rent agreements on Rs. 100 stamp signed by me as tenant and my parents as owner of the house and monthly rent receipts given to me and all the rent paid to them via cheque. Are all these documents enough to show to taxman if they knock my door while auditing my return in case it happens.

Please note that this rent agreement is not registered at sub registrar office as our understanding says less than 12 months agreements are not mandatory to register however these are attested by Gazette officer notary.

Q3. Since my both the parents jointly own this property in equal ownership, please advise in whose name I should issue a cheque ? If I put name of both then they do not have joint account, please advise if it is necessary to open ? Some experts advise to pay them proportionally so it means Rs. 4000/- each or alternate month would be right way, please expain this doubt.

Thank you very much in advance

Ravi

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Ravi

1. Yes provided you are paying equal rent to your parents.
2. Your understanding is correct and all the documents are sufficient.
3. As i mentioned in point 1 that you should pay equally through 2 different cheques of Rs 4000/- each. Ideally they should open joint account and you pay in joint name through single cheque..

Dhiren
Dhiren
8 years ago

Hi Nitin, Many thanks for the information on your site.
I live at Thane with my family in my self-acquired house and paying a home loan. My mother has an inherited flat in Mumbai (which she inherited from her father) and she has expired leaving my father, brother and myself as her legal heirs. Presently, the share certificate bears only the name of my father since the society Rules stipulate that only one person can have his/her name on the share certificate and my brother and myself as the nominees. In my case can I claim HRA by giving rent to my father. Thanks in advance.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Dhiren

No, You cannot claim HRA

Bharath Raj
Bharath Raj
8 years ago

Hi Nitin,
I have one query. My employer gives me HRA exemption. I am staying in a rented house and paying Rs.12,250/- per month.
But
in order to declare the rent, I need to get my landlord’s pan number
and he is not providing me the same. Also, I am sure he will not agree
to sign the ‘No PAN declaration form’ because he has PAN card already.
Otherwise, I will end up declaring only Rs.8333/- per month and it is a loss for me.
Hope I will receive some suggestions

Thanks
Bharath

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Bharath Raj

It is as per IT act and nothing much can be done. You have to force your landlord to share PAN.

Saanket
Saanket
8 years ago

Hi I stay with my parents. My father is owner of the house.So can I show the rent is being paid to my mother, and get the Tax exemption.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Saanket

You can claim tax exemption on the rent paid to your father not to your mother.

Snehal
Snehal
8 years ago

Dear Sir,
I live in house which is jointly owned by my parents.They have join bank account as well. Should I divide my rent amount and pay in their account equally or if I pay total in their joint account is that fine?
Mode of payment:- online transfer is allowed? as they are outstation most part of the year.
Rent agreement – Is Notarized agreement on 500 Rs stamp paper allowed? Or should we do registered rent agreement?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Snehal

It depends on your organization. To be on safer side, you should separately pay rent to your parents.

Online transfer is OK. You can get the rent receipt signed once they are in home town. A notarized agreement is sufficient. If you are in Mumbai then you may register rent agreement as it is common practice in Mumbai.

Pankaj Sharma
Pankaj Sharma
8 years ago

My company is in Banglore and they have given me work from home facility so I work from Delhi. Here in Delhi I live with my parents. So if I am payig rent to my parents can I claim for HRA?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Pankaj Sharma

As i understand your official place of work is Bangalore. Work from Home does not change the official work place from Bangalore to Delhi therefore in my opinion, you cannot claim HRA.

Pankaj Sharma
Pankaj Sharma
8 years ago
Reply to  Nitin Bhatia

Okay. Please also suggest as I am in 30% salary bracket what are the places other than 80C where I can save tax. I have investments of 1.5 lacs in 80C, 15000 in medical bills, and 7000 in mediclaim.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Pankaj Sharma

You can avail additional deduction of Rs 50,000 under NPS. Besides this
you may check following posts to make your salary structure tax friendly
https://www.nitinbhatia.in/personal-finance/11-least-known-allowances-to-save-tax/

https://www.nitinbhatia.in/personal-finance/10-perquisites-that-can-help-in-tax-savings/

sandesh
sandesh
8 years ago

I stay in Mira road(just outside Mumbai). I fall in 10% slab. Currently, I deposit 10,000 pm. into my parents account. Can I increase the rent amount to lower the tax? If yes, what can be the maximum safe amount?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  sandesh

It require detailed calculation. You may check following post for more details.
https://www.nitinbhatia.in/personal-finance/hra-house-rent-allowance/

nawaz
nawaz
8 years ago

My parents and I stay in seperate house but I am contributing for their home rent…Can I get the exemption of the rent for both the houses or I can’t. As my parents stay 25Km from my house…Can you help me how to go about claiming the HRA

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  nawaz

You cannot claim HRA for 2 properties.

HP
HP
8 years ago

Hi Nitin,

I am living with my father in his own property. I pay him Rs 8333 per month. I am claiming HRA for the same. What will be the consequences if my father doesn’t show this amount in his ITR

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  HP

He might receive notice from IT department and will be asked to pay all the taxes along with applicable penalty.

Jatin
Jatin
8 years ago

HI Nitin,

Thanks for great article! Just one question, if my rent declaration is 8,000 INR per month? Do I still need to submit my landlord’s PAN number?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Jatin

No. If rent paid is more than Rs 8,333 per month then you require PAN details of the landlord

Ravi Hegde
Ravi Hegde
8 years ago

Dear Sir, my parents used to live in a rented apartment for which I used to pay part rent of 10000 Rs. I am myself staying at office quarters in Bombay. Can I claim tax exemption for rent paid on behalf of my parents? How much?
Thank you.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Ravi Hegde

You cannot claim HRA as you are living in a company provided accommodation.

Sandeep Ghosh
Sandeep Ghosh
8 years ago

Hello Sir, I stay in my parents house and pay rent to them, in the last financial cycle I submitted the monthly rent receipts to my employer, amount mentioned was INR 5000/per month. However when filing IT Return, I found out that I can save more tax if I can show rent as INR 10000/per month. will it be ethical to update the values accordingly in the IT Return, provided I have the updated rent receipts? Will there be any issue as I have already submitted receipt of lesser amount to my employer and now I am saying I have receipt of higher amounts?

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sandeep Ghosh

You may lend yourself in tax trouble. I will not suggest.

Anees MT
Anees MT
8 years ago

Sir, I am a school teacher, staying with my parents.I paid rent to my father who is the owner of house.But he is not coming under the category of filing tax return.In this scenario can i claim HRA exemption?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Anees MT

You can claim HRA.

gopal bansal
gopal bansal
7 years ago

Sir, I and my wife are employed in private sector and are in 30% bracket for income tax. We are staying with our parentss and the house is owned by them jointly. My father is in 20% tax bracket and mother is in 10% bracket. Can both of us (husband and wife) pay rent to our parents?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  gopal bansal

You can pay rent to your parents.

Ankur Srivastava
Ankur Srivastava
7 years ago

Hi, My mother lives in a rented accommodation and i pay rent on her behalf, to the extent of Rs 17000 per month. I live in my own house and claim home loan deductions under Section 80C (principal) and Section 24 (interest) against my home loam. My organization refused to entertain HRA exemption for paying my mother’s rent. Can i claim HRA exemption for my mother’s rent while filing ITR ?

Nitin Bhatia
Nitin Bhatia
7 years ago

You cannot claim HRA deduction.

D.A.V
D.A.V
7 years ago

Hi, i am leaving in Mumbai. The flat where i am staying is in my fathers name. However, i have been depositing rent in my mothers account since she can use it to pay for household expenses.. My father will show rental income while filing his ITR. Is this okay?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  D.A.V

No. You should pay rent to your father as he is the owner.

manish mani triparhi
manish mani triparhi
7 years ago

sir i am medical shop owner and stay in my mom house can i claim hra

Nitin Bhatia
Nitin Bhatia
7 years ago

You can claim u/s 80GG. Please check my following post
https://www.nitinbhatia.in/personal-finance/hra-house-rent-allowance/

Ravindra Kumar
Ravindra Kumar
7 years ago

Hi Nitin

Thanks a lot for your articles. They really helped me in getting to know many details. I have a typical doubt and was not sure whom to ask. After going through these articles felt that this would be the best platform.

Please suggest me the best.

I am planning to purchase an apartment using joint loan (me, my wife and my mother) and joint ownership. Me and my wife will be staying there once the flat is handed over to us and my mother will be staying in our hometown. Since, my mother is not staying in the flat and since she also has ownership in the flat, can i pay rent to her and claim hra?(If so how much I can pay?)
If the above is not legal, once i pay the complete loan, can i transfer the ownership of the flat as a gift to my mother and pay the rent then? (If it is legal, do i need to wait for certain time before I transfer the ownership even if the loan is completed as i will be using 80C and Section 24 for tax exemptions for the loan). Will the gift to parents also attract any charges? (if so how much it could be)

If none of the above is legal, can u please guide me if there is any solution to save tax legally through hra and loan, and once the loan is finished through hra.

Regarding the flat, it is in Hyderabad and 10kms far from my office.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Ravindra Kumar

As you are co-owner therefore you cannot pay rent to another co-owner and claim HRA. You can gift your share to your mother. A gift from son to mother is tax free in mother’s hand.

It is not clear what will happen to your wife’s share.

Ravindra Kumar
Ravindra Kumar
7 years ago
Reply to  Nitin Bhatia

Thanks a lot Nitin…
I would like to gift my wife’s share as well to my mother… can this also be tax free? (my wife is also niece to my mother).

If we finish our loan in 3 years, can (me and my wife) gift house to my mother as and then without delay? Will it make the 80C and sec 24 benefits i have claimed in the past 3 years as taxable?

And one last thing, not sure if it fits here, but would be great if u can answer me this as well.

in terms of registration and stamp duty charges while i am gifting to my mom which of the below 2 options would be beneficial in terms of less charges and how does it work?

1. Including my mother as well in the joint account (loan and ownership) and gifting our remaining ownership to my mom once loan is completed.
2. Only me and my wife as part of loan and ownership and gifting entirely once the loan payment is done

Thanks
Ravindra

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Ravindra Kumar

It is not feasible to answer detailed queries on the public forum. I request you to either avail a personalized consultation or post your general queries in short and concise manner.

Ravindra Kumar
Ravindra Kumar
7 years ago
Reply to  Nitin Bhatia

Hey, I am sorry for the lengthier one. Would be great if u can answer the below one.

In short, can i take a joint loan on me and my mother(she doesnt have any income), but can i register the property completely on my mother name, so that i can avail the HRA(but i will be losing 80C and sec24, but i am ok for it.). Is it legally acceptable?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Ravindra Kumar

You can claim HRA provided you are paying rent to your mother and she is declaring it as her rental income.

somak das
somak das
7 years ago

Hello Sir,

I am planning to pay rent to my parents to claim HRA. My mother and father both are co owners of the apartment. My queries are,

1. Lets say I pay Rs. 10,000 as rent to both, what will be their tax liability individually? My mother is a house wife. My father is retired and receives pension. So will complete 10,000 will be added to his liability or 50% of rent as he is a joint owner?

2. My parents currently stay along with me in the apartment they own. Can I still claim HRA?

3. Is it advisable to prepare the rent agreement on both’s name or any one owner’s name also it can be made?

4. My employer asks for PAN details of owner, so what is advisable for me to do?

Regards,
Somak Das

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  somak das

1. Rental income will be divided in proportion of ownership
2. Yes
3. You should execute rent agreement with both your mother and the father
4. You have to furnish PAN.

Ravi Chauhan
Ravi Chauhan
7 years ago

Very nice and informative article.
I have one short query, It will be grateful if you could answer that.
I just completed my studies, and now will be working as a senior resident doctor in a govt. hospital in Delhi, I am not married and live with my parents and brother in Delhi, previously as student, I used to get stipend as income and for HRA exemption, I used a e-stamp paper claiming ~ Rs 8333 as rent. I was just asked to submit 3 month rent slip and the e-affidavit.
But after reading this article I wanted to know, Can I get a rent agreement made of more than 8333/month, in name of my mother (as she is the owner). She is a housewife and do not have any other source of income.
1) If I can get a rent agreement made, what Is the maximum monetary limit (If any) for rent agreement.
2) will I be getting more HRA in my salary (Currently it is about 8333) from my employer or I need to show the rent I paid in deductions while filing ITR.
PS: my mother is a housewife but holds a PAN card and I can give her PAN details and also show online transactions monthly from my salary into her account.

Looking forward for an reply.
Thanks a lot.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Ravi Chauhan

1. There is no limit as such but rent should be fair market value.
2. It depends on your salary structure. Ideally, it should be 50% of your basic salary

abhishek dwivedi
abhishek dwivedi
7 years ago

Hello Nitin Sir,
I am in a 20% slab , I am staying with my family in a rented house , but rent is formally paid by my Father however I give some contribution as I just started working , how should I show and what proofs should I show to me company for the tax exemption in HRA?

Nitin Bhatia
Nitin Bhatia
7 years ago

You can execute rent agreement in your name with the owner of the house. You can pay rent and claim HRA.

abhishek dwivedi
abhishek dwivedi
7 years ago
Reply to  Nitin Bhatia

Thank you , Also Can I take the easy way like ,Can I make an affidavit stating that I am paying this much contribution however officially my fathers name is there on the agreement ?

Nitin Bhatia
Nitin Bhatia
7 years ago

It is not possible.

Sandesh S
Sandesh S
7 years ago

Dear sir,

I am staying with my father and the house is registered in my father name under pagdi system in mumbai, I have paid the rent to my father, but not made the agreement.

1) Is is possible to claim the HRA if the house is registered in my father name in pagdi system (Actual Rent/Pagdi charges is less than amount paid Father)

2) I have not made agreement, But is it possible to claim the HRA on the basis of rent receipt only.

Thank you in advance.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Sandesh S

You have not mentioned whether your father is paying any rent to landlord under pagdi system or not. As i understand pagdi system is only tenancy rights therefore your father is not the owner of the property. Any rent paid to him does not qualify for HRA deduction.

vandy
vandy
7 years ago

Dear Nitin Sir,
my father age 58 has a self owned residential plot on which we have recently constructed a bungalow for self use and we will be getting occupancy certificate in next few weeks.we have taken home loan for construction of 1.38 cr at 9.75 roi and top up loan loan against property of rs 45 lacs roi 10.25 tenure of both is 15years my dad is main borrower,me and my mother are co borrower,our business is in automobiles and its a partnership firm in which my parents are partners,i have my income from real estate deals as a broker.My query is,me my wife and my child live with my parents and we have no other property.Once we shift to the new bungalow can i pay rent to my father
who is the owner of the land and i become a tenant in the new house and can my father claim all pre emi interest and interest on full emi for tax deductions.
what other options do we have for tax savings.

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  vandy

Your understanding is correct. You can pay rent and claim HRA exemption. As your father is owner of the property therefore he can claim 100% tax deduction on home loan.

Rachit
Rachit
7 years ago

Hello Nitin Sir

I and my mother are joint owners in our home. THe home loan EMI is however being borne completely by me. Due to work I live in a different city on rent while my mother and brother stay in the home. This is my and my mother’s first real estate. So I wanted to check if I can claim the entire interest paid on the home loan in exemption or will it be limited to Rs. 2 lakhs per annum? Is there a way to increase the exemption amount?

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Rachit

The property will be considered as let out and since you are paying 100% EMI therefore you can claim 100% tax deduction. You may check my following post
https://www.nitinbhatia.in/personal-finance/income-from-house-property/

Digvijay Singh Bisht
Digvijay Singh Bisht
7 years ago

Hello Nitin Ji
I lives with my parents and the house is in the name of my mother; I works in central government (Corporation) and daily commute for 25 kms ? am i applicable for house rent allowance exemption and lease accomodation;
if yes then can you provide any circular in this regard as competent authority is not allowing for more than 15 kms.

Nitin Bhatia
Nitin Bhatia
7 years ago

Normally HRA policies are bit subjective. The different organization have their own distance criterion. In big cities, a distance of 50 Kms is okay but may be in small cities this distance is 10 Kms. It seems you stay in a small city or town and because of which the distance criterion is 15 Kms.

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