Paying rent to parents? Get HRA

You have a question about house rent allowance, medical allowance or even a general tax query.

Let our experts, Relax With Tax, tackle your problems and set your mind at rest.

• Got a question for Relax With Tax? Please write to us!  

I  live with my parents. My dad owns the house but is financially dependent on me. I pay Rs 5,000 every month to him as house rent, for which I get a receipt. 

Can I claim HRA on this?

- Ananth Prasad K S

I pay Rs 5,000 every month to my mother as house rent. She owns the house and gives me a receipt.  She is not financially dependent on me.

Can I get a tax benefit?

- Ruchika Bhatnagar

I pay Rs 7,000 every month to my wife as house rent. She owns the house and gives me a receipt. She is a PAN holder and files a return regularly.

Can I get tax benefit though she is dependent on me? 

 - Ashish Chandra

What is HRA?

House Rent Allowance is a component of your salary package. This allowance is given by an employer to an employee to meet the cost of renting an accommodation.

When is it valid?

If you pay no rent either because you stay in a rent-free accommodation or live with your family or in your own house, you will not get this benefit.

This benefit is also not available if the rent you pay does not exceed 10% of your salary.

In order to claim HRA, the following minimum conditions should exist:

1. You should be staying in a rented accomodation.
2. The house should not be owned by you.
3. You should be paying the rent.
4. This rent must be in excess of 10% of salary (salary, in this case, includes your basic salary + dearness allowance).

If these conditions are satisfied, the HRA benefit is available to you.

Rent to parents

It would be advisable for the landlord, in this case your parent, to declare this income in his/ her personal Income Tax return. This will prevent any litigation in the future.

Rent to spouse

The relationship between a husband and wife is not commercial in nature. After all, a husband and wife are supposed to stay together.

Hence, payment of rent to a spouse (in your case, your wife) may not be accepted by the income tax authorities. They may view this as a sham transaction to avoid tax.

• Claim home loan benefits, HRA

I get Rs 120,000 per annum as HRA, which is 50% of my basic salary. I pay a rent of Rs 10,000 per month.

Will there be any tax on the HRA I get?

 - Nayab Saiyed

 Since Rs 1,20,000 is 50% of your basic salary, then it is safe to assume that your basic is Rs 2,40,000.

• Must I pay service tax?

I have a query regarding pension funds.

It is eligible for a tax deduction under Section 80C. However, under Section 80CCC, the contribution made to pension funds is subject to a maximum of Rs 10,000.

Moreover, any contribution made by central government employees towards the pension scheme, under Section 80CCD, is subject to the following limit -- it should be a maximum of 10% of their salary.  

So is there there is a sub-limit set to contributions made to pension funds and pension schemes under Section 80C?

- Seetharaman

You are right. The overall ceiling has been set as Rs 1,00,000 under Section 80C.

The investments that fall under Section 80C include:

• Provident Fund
• Public Provident Fund
• Life insurance premium
• Pension plans
• Equity Linked Saving Schemes of mutual funds
• Infrastructure bonds
• National Savings Certificate

Besides these investments, the payments towards the principal amount of your home loan are also eligible for an income deduction.

There are no sectoral caps on the eligible investments in this section.

However, the investment ceiling specified under Section 80CCC and 80CCD are still applicable, just like the investments in Public Provident Fund are limited Rs 70,000.

• Is PF included in Section 80C?

Got a question for Relax With Tax? Please write to us!

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, rediff.com or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).

Illustration: Dominic Xavier