HRA Exemption: It is necessary that the house is not the property of the tenant, and the rent paid to the parent is paid through bank, and the tenant (parent) pays income tax on the amount received as rent…
Every employed person tries at some point of time to reduce his income tax liability, and the government also provides many deductions and exemptions in income tax so that taxpayers can save money. One such exemption is the exemption in House Rent Allowance, which is called HRA Exemption or HRA Rebate.
House Rent Allowance (HRA) is a head that can help any taxpayer a lot in saving income tax, and many salaried people also use it. To save income tax, many salaried people pay monthly house rent to their parents and then get exemption on that amount, but it is very important for such people to keep some things in mind.
Those who pay rent to their parents should remember…
The most important thing in this context is that the house for which the salaried taxpayer is paying or claiming to pay the rent, that house (i.e. property) should not be in his own name. As per the rules, the house should always be in the name of the landlord (to whom the rent is being paid). So, keep in mind, it is wrong to show your mother or father as the landlord collecting the rent while living in your own property.
Also Read: ITR Filing: You can file income tax return till July 31, 2024 without penalty, these documents are required
Landlords must also file ITR…
Another thing to remember for a salaried person who is claiming or going to claim HRA Rebate is that the parent, whoever is shown collecting the rent, should include the rent amount in his or her income and file income tax return. In fact, under section 10 (13A) of the Income Tax Act, any salaried person is exempted from income tax on the lowest amount – 50 percent of his basic salary, the amount received as HRA, or the amount remaining after deducting 10 percent of the basic salary from the actual rent paid. Therefore, many salaried people get exemption by giving rent receipts in the name of their mother or father. The most important thing to remember for such people is that it is necessary for the mother or father to show this rent amount in their income and pay tax on it.
Always keep documentary evidence ready…
There is one more important thing – always keep documentary proof of the rent paid to your parents ready. That is, you must have the rent receipts, and it would be better if you always pay the rent online, so that your and the landlord’s bank account statements can also be presented as proof.
How much will the mother or father’s income be recorded…?
If you are claiming HRA Rebate by paying house rent to your parents, then the same amount will be included in the income of the parents. For example, if a person gets ₹50,000 basic salary along with ₹25,000 as HRA, and he actually shows ₹25,000 as the rent amount, then he will get HRA exemption only on ₹20,000 per month, because this is the amount left after deducting 10 percent of the basic salary from the amount of rent paid. So, now the income of the parents collecting the rent will increase by ₹20,000 per month (even if their income is zero, their income will now be considered as ₹20,000), and after deducting 30 percent maintenance expenses from this amount, they will have to pay income tax on the remaining amount.
So, overall it is very important that the rented house should not be the property of the tenant, and the rent paid to the parents should be paid through the bank, and the tenant (parent) should include the amount received as rent in his income and pay income tax on it.
