After HRA calculation, i can get maximum benefit if i pay 60000 per month as rent. But I am from a small town, and rent near my home is around 10-15k. Is it okay if i pay 60000 to my parents as rent? Is there any restriction of how much rent we can pay to parents? Is there any risk involved?
Hey @ram
To calculate HRA exemption, here is the calculation:
- Actual House Rent Allowance from employer
- Actual rent paid less than 10% of basic salary
- 50% of basic salary if you live in a metro city or 40% of the basic salary if you live in a non-metro city.
The rent paid should be genuine as per the market rates and not unreasonable. This is something that the AO (Assessing Officer) can question after issuing a tax notice. Further, there must be a rental agreement as a documentary proof for the rent expense.
You can read more about HRA here - House Rent Allowance : Rules, Exemptions, and Calculations
Hi,
Can a landlord sublease his home to his wife who does not have any income, and thereby save on tax. Effectively, he will collect a smaller amount as rent and then his spouse sub leases to tenants at a premium and records as income from business while the landlord pays tax on the nominal rent from his spouse. This is to ensure a sustainable remuneration.
a. Can the tenants claim HRA for paying rent to spouse?
b. Can the landlord collect rent from his wife as arrears in the subsequent year as per agreement.
c. Is there any potential issue if all of it is declared and filed?
d. Are there any changes to the treatment if the landlord leases to his spouse with sub lease for more than 12 years?
Hello @UrbanNitin,
To answer your questions:
a. Tenant can claim HRA for rent paid by him.
b. Rent can be collected as per the rent agreement.
c. Yes, it can result into a potential issue. As per section 60 of Income tax act, If an individual transfers any income without transfer of asset then such income shall be taxed in the hands of transferor.
d. Period of lease might attract other acts, but it is unrelated to tax provisions.
Hope this helps!
Thanks so much for this. So profits from leasing or sub leasing activity is not really entertained? How can this be construed as a business activity wherein the spouse is sub leasing the home to tenants on a composite basis.
Hey @UrbanNitin,
Rent received from sub-leasing is taxed under income from other sources and not business income.
Hope this helps!
Thanks, but in any form of leasing including sub leasing, the asset is never transferred but solely used. So, all forms of sub leasing will always be taxed to the asset holder?
Hi,
I have rented a PG in Bangalore where I stay for 2 weeks every month and pay full month rent of 7000/-. For rest of the two weeks, I stay with my parents and pay them 7000/- as rent for full month. In this case can i claim hra deduction for both property and show as I pay rent of 14000 every month or I can claim for only one property and show rent as only 7000/-
If you meet the condition laid out for claiming HRA deduction, which is that HRA should be part of your salary, you actually pay the rent and live at that rented accommodation, you can claim the same.
Read more about House Rent Allowance (HRA): Rules, Exemptions, and Calculations - Learn by Quicko.
Thanks for clarification
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Dear Team,
I own a 1 bhk flat where I used to stay with my parents and sister. After my marriage, I chose to live on rent with my wife in the same society due to the space constraints. My parents and sister still stays at my self owned 1 bhk flat. Can I claim the HRA exemption in this case for the rented property? Is there any rule which states that I cannot do this because both the self owned property and the rented house comes under the same municipal corporation limits?
Also when the large family could be a genuine reason for living on rent in the same city/society, who decides this combination with respect to flat size, i.e., 1 bhk flat is ok for living 3 members and not for 4 members and what is that standard combination if defined somewhere?
At present I am not taking the benefit of this tax exemption thinking that it is not applicable to my case, but if the rule allows me to do so, will I face any challenges from IT department in future if I start taking this benefit from now onwards and how to handle it?
When I consulted the CA, I got to know that the Income Tax Act is silent about this. I just wanted to make my case compelling because If I go ahead and claim the HRA now but later get slapped with a tax demand notice if the IT department decides to disallow my HRA tax allowance.
Appreciate your response on this.
Regards,
Anup R
Hi @TAXX,
A taxpayer is not eligible to claim HRA if he/she owns a self-occupied residential accommodation in the same city.
if you are living on rent in your city of job and own a house in another city then income tax benefit can be claimed on HRA.
So, as per your stated situation, you’re not eligible to claim an exemption on HRA.
Read more about it here,
Hope this helps.
Hi Team,
My employer did not input “HRA allowance under 10(13A)” in the Form 16. It is mentioned as 0.
So, Can I get input HRA allowance 10(13A) while filing ITR ?
My Gross salary shown in Form16 is 15L
My Annual rent is around 2.04L (17K per month).
So in this situation,
Can i input “HRA allowance under 10(13A)” as 2.04L while filing ITR ?
You can claim the HRA u/s 10(13A) while filing your ITR.
You can read more about the maximum HRA that you can claim here.
Hi,
Thanks for the blog.
It says about HRA allowance calculation which is least of specific 3 amounts.
My question now is,
- My Gross income is 15L and so While filing ITR, I will fill my gross income as 15L and enter “HRA allowance under 10(13A)” with the amount calculated from least of 3 amounts mentioned in the blog. Is this correct ?
OR - I will fill my gross income as 15L and enter “HRA allowance under 10(13A)” with the amount of my annual rent paid. Is this correct ?
- If I do not have HRA component in my salary, then I cannot claim it under 10(13A), but can claim under 80GG. Is this correct ?
You should enter the gross income as 15 lakhs and under the HRA allowance u/s 10(13A) you should write the amount which is least of specific 3 amounts.
Yes, that is correct. You can claim either one of the two. Here’s a read on 80GG - Deduction for Rent Paid - Learn by Quicko for your reference.
Hope this helps.
When I checked my payslip, it mentioned only Basic salary and special allowance.
In this case, I should only go with 80GG ?
OR
Can i consider that special allowance as actual house rent allowance and compare with other 2 amounts(Actual rent paid less than 10% of salary, 50% of salary) and input its least amount as HRA under 10(13A) ?
The special allowance is a different thing altogether and hence cannot be replaced with other allowances.
You should go with the deduction u/s 80GG if your payslip does not show the bifurcation stating HRA.