HRA Exemption available for Rent paid to Father?

Query: My family is living jointly with my parents in a residential bungalow owned by my father at Ahmedabad.  My company pays me, annually a Basic Salary and DA of Rs.2,50,000 and HRA of Rs.1,00,000, apart from other taxable perks and allowances worth Rs.2,50,000.  If I pay a fair rent of Rs.12,000 per month to my father, can I claim any benefit of HRA exemption? What would be the tax liability for my father, who is a Senior Citizen earning annual taxable income of around Rs.1,25,000?


Reply: You would be eligible to claim exemption in respect of HRA under Section 10(13A) on the basis of the least of the following three amounts:

  • Annual rent paid (Rs.1,44,000) in excess of 10% of your Basic Salary and DA (Rs.2,50,000), that is Rs.1,19,000 (1,44,000 – 25,000).
  • HRA received from your employer, that is Rs.1,00,000.
  • 40% of your Basic Salary & DA (Rs.2,50,000), that is Rs.1,00,000.

The entire HRA of Rs.1,00,000 can thus be claimed exempt, on which you can save Income-tax of Rs.30,900 at the rate of 30.9% as applicable in your case.

In your father’s case, from the amount of rent of Rs.1,44,000 received by him, he would be entitled to a standard deduction of 30% amounting to Rs.43,200 and hence his taxable rental income would be Rs.1,00,800. Keeping in view the exemption limit of Rs.2,50,000 in the case of Senior Citizens, he would not attract any tax liability on his taxable income of Rs.2,25,800 (1,25,000+1,00,800). With the rent remaining tax free with your father and your own tax saving of Rs.30,900 it would  be a win-win situation for your family!



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