Can I have rent agreement in the name of my parents to avail tax benefit?

Yes

Those who live with parents, can pay rent to their parents and save tax on HRA.

HRA or house rent allowance is the most common allowance received by the salaried. Those who live in parents house can maximize on saving tax through HRA.

Ownership of the house: Since rent is paid to owners, the property must be owned by your parents. It may be owned by one or both of your parents. Remember that you cannot be an owner or co-owner of this property since you cannot claim tax exemption on rent paid to yourself.

Paying rent: You can pay rent to your parents by transferring money to their bank account or pay via a cheque. This way you will be able to claim your HRA deduction properly.

Rent agreement and rent receipts: Usually employers ask for a copy of the rental agreement for their records. They can also request rent receipts to allow you HRA exemption. You can enter into a simple rent agreement with your parents. You can prepare rent receipts by creating a simple template on ms-excel or write to us, we share. You can print these receipts and submit to your HR/payroll department. You can also save them on your computer. It is important to keep proper records in case the assessing officer ask for them.

Rental income is taxable for parents: Rent paid by you to your parents shall be taxable for them. They will include this income under the head ‘income from house property’ in their tax return. They can claim property taxes paid by them and also claim a 30% standard deduction from this rental income.

Save tax as a family: By submitting rent receipts and paying it, you will be able to claim exemption on HRA. Your parents can deduct property taxes and also claim 30% standard deduction on the rental income. If they are in a lower tax bracket than you, the family can save tax as a whole. If they are more than 60 years old, they will also enjoy a higher minimum income exemption limit (Rs.3 lakh for those who have aged above 60 years old and Rs.5 lakh for those who are aged above 80 years old). In case they do not have any taxable income, you will be able to save significant tax as a family.

In Karnataka, we provide rental agreement service. Our service includes drafting + execution + notary + home delivered in 2 working days. Same-day express delivery available. To opt for our service, please WhatsApp to 9 7 4 2 4 7 9 0 2 0.

Thank you for reading…

Location: India

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