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India Today
3 days ago
- Business
- India Today
Want to save tax by claiming HRA for rent paid to parents? Read this first
It's that time of the year again when salaried employees rush to file their Income Tax Returns. And with that comes the usual scramble to find ways to save tax. But not all shortcuts are smart, some can actually land you in hot the example shared by CA Apoorva Gavai, who was recently chatting with a friend. 'I'll just say I paid rent to my parents and claim HRA — simple, right?' her friend said was quick to ask the obvious, 'Wait... have you actually been PAYING them rent?' The reply? 'Umm no. But it's legal, right?' This is where the confusion lies. Yes, claiming House Rent Allowance (HRA) while living with your parents is allowed. But there's a catch, you must actually pay rent, and you must have proof of she says, is the classic 'jugaad' mindset, trying to find loopholes rather than following the BUT ONLY IF DONE RIGHTAccording to tax rules, salaried individuals can claim HRA even if they're living in their parents' home. But the rent must be real, paid regularly, and documented properly. The Income Tax Department is now closely watching such claims, and has started sending notices to people who show rent payments without proof.'It's technically legal to claim HRA if you're paying rent to your parents,' Gavai said. 'But it's only legal if you're actually doing it, and doing it right.'PLANNING TO CLAIM HRA THIS WAY? HERE'S WHAT YOU MUST DOIf you're planning to claim HRA while living with your parents, make sure you're doing it the right way. The rent you pay must be genuine, regular, and transfer the rent through your bank account every month; cash payments or last-minute transfers won't hold up if questioned. It's also wise to have a proper rent agreement in place, signed by both parties, to serve as importantly, your parents must declare this rental income in their Income Tax Return (ITR). If they don't, it could be treated as tax evasion.'No transactions = no deduction,' the CA explained. A verbal understanding is not enough. And if your parents don't show rental income in their ITR, it's tax evasion.''Half-baked knowledge is the fastest way to land an IT notice in your inbox,' Gavai warned. 'If you're earning a salary and looking to save tax, know the rules — don't game them.'- Ends
News18
4 days ago
- Business
- News18
Claiming HRA By Paying Rent To Parents? Know The Rules Before You Do
Last Updated: 'It's technically legal to claim HRA if you're paying rent to your parents. But it's only legal if you're actually doing it — and doing it right," says CA Apoorva Gavai. HRA Deduction By Paying Rent To Parents: If you're a salaried employee looking to reduce your tax burden, claiming House Rent Allowance (HRA) by paying rent to your parents might seem like a smart move. And yes, it is legal — but only if it's done properly and genuinely. CA Apoorva Gavai in a recent post on LinkedIn said, 'Yes — it's technically legal to claim HRA if you're paying rent to your parents. But it's only legal if you're actually doing it — and doing it right." Every year, during income tax return (ITR) season, tax professionals encounter cases where individuals attempt to claim HRA without actually fulfilling the necessary legal conditions. The 'jugaad" mindset may work in other areas of life, but when it comes to taxation, shortcuts can lead to Income Tax notices and penalties, according Gavai. Under Section 10(13A) of the Income Tax Act, salaried individuals living in rented accommodation can claim HRA deductions. The law does not restrict the landlord to a third party. So, if you're living with your parents and actually paying them rent, you can legally claim HRA. But there's a catch: You must be able to prove it. What the Income Tax Department Looks For In recent years, the Income Tax Department has increased scrutiny of HRA claims, especially those involving rent paid to family members. Salaried individuals have started receiving notices when they: In essence, the tax department is tightening the loop to crack down on fraudulent deductions. How to Claim HRA to Parents? Here's what you must do to ensure your claim stands up to scrutiny: Actually Pay Rent via Bank Transfer Make sure to transfer rent every month to your parents' bank account. Cash payments or backdated transfers are red flags. A consistent digital trail helps you prove genuine intent and regularity. The monthly rent amount Duration of tenancy Address of the property Names and PAN details of both parties Having a written contract formalises the arrangement and strengthens your claim. Your parents should report this rental income in their own ITR under 'Income from House Property". If they fail to do so, it could lead to mismatches in records and possibly land you in trouble. What Not To Do Avoid these common pitfalls: No rent transfer: Just claiming rent on paper without financial proof can lead to tax notices. Verbal agreements: These hold no value for tax claims. Last-minute calculations: Backdating rent or transferring a lump sum in March raises suspicion. Parents skipping ITR declaration: This is a classic red flag for the taxman. Documents to Keep Handy HRA Claim: An Example Let's say: You earn Rs 10 lakh annually. You live with your parents and pay Rs 15,000/month in rent. They're retired and fall in the 5% tax bracket. top videos View all By claiming HRA properly, you may reduce your taxable income by a significant amount. Meanwhile, your parents declare the rental income in their ITR, possibly paying less tax overall — a win-win if done correctly and legally. 'If you're earning a salary and looking to save tax, know the rules — don't game them. Half-baked knowledge is the fastest way to land an IT notice in your inbox," CA Apoorva Gavai said. About the Author Mohammad Haris Haris is Deputy News Editor (Business) at He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris More Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. Get in-depth analysis, expert opinions, and real-time updates—only on News18. Also Download the News18 App to stay updated! tags : house rent income tax income tax return ITR filing view comments Location : New Delhi, India, India First Published: August 07, 2025, 09:08 IST News business » tax Claiming HRA By Paying Rent To Parents? Know The Rules Before You Do Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
