Tax exemption through HRA

Anks 46
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Hello,

I live with my parents in Delhi - the home which we live in is jointly owned by my father & mother (the first name on the registry is that of my father). I have seen my peers in office depositing rent receipts duly signed by their parents (either father or mother) and claiming tax exemption under HRA. I discussed this with my father who mentioned that if I have to submit similar rent receipts to claim tax exemptions, he will have to sign it because he is the first joint holder of the house. Apparently, he is not willing to sign such rent receipts as his income is already taxable and this would further increase his tax burden. Now, my questions:

  1. Is it legal for an individual to claim tax exemption under HRA by paying a monthly lumpsum amount to his/her parents and getting the rent receipt signed?

  2. If yes, is there any lower and/or upper limit to such tax exemption claims?

  3. Can I get the rent receipts signed by my mother, who is the 2nd joint holder of the house? I understand that this income from rent will be taxable for her as well.

  4. If in this case, it is okay for my mother to sign the rent receipts, please can you give reference to any appropriate tax rule for further reference?

Thank you! Anks

rent-to-parents hra-exemption rent-receipt house-rent-allowance
1 Answers
  1. Yes, it is legal for an individual to claim tax exemption under HRA even if they pay rent to their parents. They have to produce rent agreement or rent receipts.
  2. There is no upper or lower limit for same. Normal HRA exemption rule will apply.
  3. Yes, you can get the rent receipts signed by your mother, who is the 2nd joint holder of the house. She would only have to show rental income in her taxable income in proportion in which she owns property. Rest of the rental income should be added to your father's income as per section 26 of IT act.

Moreover, its mandatory to provide PAN details of landlord in case rent is more than 2 lakh in a year.

Pankaj Batra5212

Hi Pankaj,

Many thanks for the swift response - it is much appreciated. Your detailed response answers my query in detail with the exception of just one aspect.....please could you clarify:

  • I don't intend to burden my father with tax liability in addition to his existing tax liability. Is there a way and/or provision through which the income from rent becomes taxable for my mother only? The ownership of the house is shared in 50:50 ratio between my father & mother (first owner and second owner respectively). Is is not okay for my mother to sign the rent receipts and be 100% liable to pay the associated income tax?

Thanks

Anks

Anks•

As per rules, rent should be shared in all owners in ownership ratio.

But frankly, its difficult to track back for IT department here. First IT department would need to get rent receipts from employer, pick PAN from there, check has PAN holder declared this rental income in his return. Next they need to call landlord whose PAN is provided, check property papers on his/her name. Now only they will come to know that particular property is also owned by some other person and then they can open case for other owner.

Do you think IT department has time and resources to do this?

I know its not correct, but its happening everywhere.

Pankaj Batra•
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