I’m at the moment working from dwelling remotely. I’m dwelling with my mother and father, and so they additionally reside on hire. Can I declare HRA exemption if I ship hire to my mother and father’ account month-to-month? Although my mother and father don’t have any hire settlement as a result of we keep in a small metropolis the place hire agreements usually are not frequent. Is there any means I can declare HRA by making any paperwork by means of notary?
— Title withheld on request
It’s presumed that you’re a salaried particular person and obtain a Home Lease Allowance (HRA) out of your employer.
Part 10(13A) of the Earnings-tax Act, 1961 learn with Rule 2A of the Earnings-tax Guidelines, 1962, governs the exemption in the direction of HRA acquired from employer.
As per the provisions of this part, an exemption in the direction of HRA is out there to a taxpayer:
.- if rental funds are literally incurred by the taxpayer in respect of residential lodging occupied by him/ her
– topic to the boundaries specified.
Nevertheless, within the following situations, the HRA exemption is just not allowed:
– the residential lodging occupied by the taxpayer, is owned by him; or
– the taxpayer has not truly incurred expenditure on fee of hire in respect of such residential lodging.
Within the instantaneous case, we perceive that the lodging has been rented by your mother and father and the hire funds to the owner are being accomplished by your mother and father. There isn’t a hire settlement executed between your mother and father and the owner. You plan to reimburse these rental funds to your mother and father.
Within the instantaneous case, whereas it may be argued that the rental funds are in the end borne by you for an lodging occupied by you however not owned by you, nevertheless, because the hire is just not instantly paid by you to the owner, declare of HRA exemption is just not free from doubt. Additionally, rental funds made to family members (mother and father/ partner / siblings, and many others.) have been an issue of litigation and could also be challenged. The genuineness of the transactions in any case, would must be substantiated with acceptable documentation corresponding to registered/ notarized rental agreements, appropriately stamped hire receipts, financial institution statements reflecting the rental funds, PAN of landlord, TDS as relevant deducted from hire, and many others. Additional, taxability of rental receipts within the arms of your mother and father would additionally must be evaluated.
Please observe that for those who select to assert the HRA exemption by means of your month-to-month payroll, grant of such exemption on the TDS stage by your employer, may also be topic to your employer’s insurance policies across the documentation necessities for permitting such an exemption, during which case chances are you’ll then want to assert it in your tax return.
Individually, please observe that HRA exemption is just not obtainable out of your taxable earnings if you’re choosing the brand new tax regime.
Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.
Up to date: 04 Jun 2023, 11:39 PM IST