Can I declare HRA for lease that parents pay?

I’m for the time being working from dwelling remotely. I’m residing with my dad and mother, and they also moreover dwell on lease. Can I declare HRA exemption if I ship lease to my dad and mother’ account month-to-month? Though my dad and mother don’t have any lease settlement because of we preserve in a small metropolis the place lease agreements won’t be frequent. Is there any strategy I can declare HRA by making any paperwork by the use of notary?

— Name withheld on request

It is presumed that you are a salaried specific particular person and procure a House Rent Allowance (HRA) out of your employer.

Section 10(13A) of the Income-tax Act, 1961 study with Rule 2A of the Income-tax Rules, 1962, governs the exemption within the course of HRA acquired from employer.

As per the provisions of this half, an exemption within the course of HRA is obtainable to a taxpayer:

.- if rental funds are actually incurred by the taxpayer in respect of residential lodging occupied by him/ her

– matter to the boundaries specified.

However, throughout the following conditions, the HRA exemption should not be allowed:

– the residential lodging occupied by the taxpayer, is owned by him; or

– the taxpayer has probably not incurred expenditure on price of lease in respect of such residential lodging.

In the second case, we understand that the lodging has been rented by your dad and mother and the lease funds to the proprietor are being accomplished by your dad and mother. There isn’t any lease settlement executed between your dad and mother and the proprietor. You recommend to reimburse these rental funds to your dad and mother.

In the second case, whereas it could be argued that the rental funds are in the long run borne by you for an lodging occupied by you nonetheless not owned by you, nonetheless, as a result of the lease should not be immediately paid by you to the proprietor, declare of HRA exemption should not be free from doubt. Also, rental funds made to relations (dad and mother/ accomplice / siblings, and plenty of others.) have been a topic of litigation and may be challenged. The genuineness of the transactions in any case, would ought to be substantiated with acceptable documentation equal to registered/ notarized rental agreements, appropriately stamped lease receipts, monetary establishment statements reflecting the rental funds, PAN of landlord, TDS as related deducted from lease, and plenty of others. Further, taxability of rental receipts throughout the fingers of your dad and mother would moreover ought to be evaluated.

Please phrase that in case you choose to claim the HRA exemption by the use of your month-to-month payroll, grant of such exemption on the TDS stage by your employer, may even be matter to your employer’s insurance coverage insurance policies throughout the documentation requirements for allowing such an exemption, by which case likelihood is you may then wish to assert it in your tax return.

Separately, please phrase that HRA exemption should not be accessible out of your taxable earnings in case you’re selecting the model new tax regime.

Parizad Sirwalla is confederate and head, worldwide mobility suppliers, tax, KPMG in India.

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Updated: 04 Jun 2023, 11:39 PM IST