As per the Income Tax guidelines, if an employee rented residential accommodation, he can claim HRA Allowance, However, I came to know that employee can claim exemption on rent paid to others, including parents, brother, sister in-laws, etc. Please clarify if employee can claim his rent rent paid to parents (if staying in same city/different city)?
- Nagendra Kumar
If you are staying with your parents, you can pay rent to them and seek HRA exemption on the amount. However, this would work well only if your parents don't have any taxable income (or very low income). This is because the rental income is added to the income and taxed as per the Income Tax slab applicable to the taxpayer. However, you have to make sure that you do everything in a transparent manner: the rent should be realistic, pay rent to the parent who owns the house, issue cheques for rent payment, get receipt for it, try to have a leave an license agreement, and so on. You should also remember that you have to provide the PAN card details of your parent if the rent paid is more than ₹1 lakh.
This article was originally published on February 05, 2016.
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