HRA and earnings tax profit – When you possibly can declare it

Question: I reside in a property singly owned by mom. I pay hire to her and have been claiming declare HRA deduction for previous 7 years. I pay hire by way of on-line financial institution switch, take hire receipts, present my mom’s PAN for HRA deduction to my employer, renew the hire settlement yearly and my mom exhibits the rental earnings in her IT return.

We are planning to promote the present home and purchase a brand new home. The new home shall be financed by the proceeds of the outdated home and my mom’s different Savings (which embody the hire I’ve been paying her). Now, contemplating that she is outdated and I do not wish to undergo authorized hassles of getting the identify transferred into my identify after her loss of life, we want to get my identify included as a joint proprietor within the newly bought property.

Since I cannot be paying a single rupee in the direction of the acquisition value of the property, can I nonetheless proceed paying hire to my mom after we transfer into the brand new home the place I’m a joint proprietor of the property? Will I be eligible to say the HRA exemption on such hire cost? – Tapas

Answer: As per Section 10(13A) of the Income Tax Act, there are particular circumstances which one has to fulfill for claiming the tax good thing about House Rent Allowance.

Firstly, you need to be in receipt of HRA out of your employer. So in case your employer doesn’t provide you with any HRA or you’re a self-employed particular person, you cannot avail the HRA profit. Secondly You needs to be paying the hire for the home occupied by you. So in case you might be paying hire for the home occupied by your mother and father, you can’t declare the HRA advantages.

And lastly the home for which you might be paying hire shouldn’t be owned by you. Since the brand new home shall be funded totally by your mom and your identify solely shall be added as a joint proprietor for succession function, you’d be a joint proprietor technically solely. It is your mom who shall be full proprietor of the home. Since you wouldn’t be useful proprietor of the home proposed to be bought, I don’t see any purpose why you shouldn’t be entitled to say HRA profit in respect of hire which you’ll pay to your mom as there isn’t a restriction on claiming the HRA advantages by paying hire to your mother and father.

Balwant Jain is a tax and investments skilled and might be reached at jainabalwant@gmail.com

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