Questions Regarding HRA

The following information is for educational purposes only and please consult your financial adviser or financial planner for further details.

These were some of the questions that I wanted answers and I am glad that I found them.

1. Can I pay to rent to my father if he owns a house? Is it legal?

Yes, you can pay rent to father and get the rent receipt from him. It is advisable for the landlord, i.e. your dad to declare this income in his personal Income Tax return. This will prevent any further litigations. It is legal in the Tax Rules.

My Suggestion would be, if your mother is house wife then Pay the rent to her and get the receipt from her (The house should be registered in her name). Since you are aware that ladies get a better tax break, it will be beneficial for you and your family. Just ensure that she files Income Tax returns.

2. Can I pay rent to my spouse if he/she owns the house?

No, you can’t do such a thing. The relationship between husband and wife is not commercial in nature. Income tax officials view such a transaction as a sham transaction to avoid tax.

3. Minimum Documents required to claim HRA:

  • You should be staying in a rented accommodation.
  • The house should not be owned by you.
  • You should be paying the rent.
  • Rent must be in excess of 10% of your salary.

HRA Calculation:

HRA paid to employee = Rs. W

Rent paid by employee = Rs. X

10% of Basic = Rs. Y

Rent paid – 10% of Basic = X – Y

40% / 50% of Basic = Rs. Z

H.R. A Exemption is least among the following the three components, i.e. Rs. W or Rs. ( X – Y ) or Rs. Z

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