Rent payment to parents

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?

@Sakshi_Shah1 can help

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