Here’s How You can Claim HRA Exemption on Rent Paid to Spouse

In the lead-up to Budget 2024, anticipation is building for potential adjustments to exemption limits by the finance ministry, offering a possible relief from tax burdens. Notably, House Rent Allowance ( HRA ) stands out as a crucial tax exemption, irrespective of property ownership. Even if the dwelling belongs to one's spouse, individuals can still claim HRA as part of their salary. Section 10(13A) of the Income Tax Act enables employed individuals to seek exemptions for House Rent Allowance ( HRA ). Given the significance of this allowance in one's income, adhering to the company's guidelines on HRA claims is crucial. HRA is a part of your salary income and therefore, it is initially considered as your taxable income. However, if you live in a rented accommodation, you can claim a tax exemption either – partially or wholly under Section 10(13A) of the Income Tax Act. This is popularly known as HRA exemption. If you don’t live in a rented accommodation, this allowance is fully taxable. To qualify for HRA exemption, you need to fulfill the following criteria: 1. Reside in rented accommodation. 2. Have HRA included in your CTC. 3. Provide valid rent receipts and evidence of rent payments. The calculation for HRA exemption is contingent upon factors such as salary, rent payments, HRA received, and the employee's city of residence. Ensure compliance with these conditions to maximize your HRA benefits. It is essential to understand that the HRA exemption is not applicable in the new tax regime. To avail oneself of the tax benefits associated with rent allowance, one must adhere to the provisions of the old tax regime. For a deeper understanding of HRA exemptions, let's delve into six key points: 1. Exemption under HRA can be claimed for rent paid to a spouse. 2. Recent court decisions, such as the June 2023 ruling by the Income Tax Appellate Tribunal ( ITAT ) in Aman Kumar Jain's case, emphasize that rent paid by a man to his wife qualifies for HRA, allowing for tax exemption. The ruling rejects the notion that a husband cannot pay rent to his wife. Read More: Rent Paid to Wife Eligible for HRA Deduction u/s 10(13A) of Income Tax Act: ITAT In the significant ruling, the Income Tax Appellate Tribunal ( ITAT ), Delhi bench has held that the rental amount paid to the wife is eligible for HRA deduction under section 10(13A) of the Income Tax Act, 1961. The assessee, Mr. Aman Kumar Jain filed his income tax return claiming a deduction for HRA under Section 10(13A) of the Income Tax Act, on account of rent paid to his wife. The claim was denied by the authorities below by holding that from the ITR of his wife there is no other income other than rental income. The bench comprising Shri Chandra Mohan Garg ( Judicial Member ) has noted the fact that the wife of assessee is earning income from business and profession in addition to rental and interest income and filing returns of income paying taxes thereon. 3. It is advisable for spouses to formalize the arrangement through a rent agreement, with the wife issuing rent receipts to the husband, mirroring a typical landlord-tenant agreement. 4. Declarations of rent in the wife's income is compulsory, even if her earnings fall below the taxable threshold; filing taxes remains a necessity. 5. The wife should have sole ownership of the property, with the husband not being a co-owner. 6. To claim tax exemption, taxpayers must submit the rent agreement, rent receipts, and Form 12BB to their employers when applying for HRA. FORM NO. 12BB under See rule 26C is a Statement showing particulars of claims by an employee for deduction of tax under Section 192 of the Income Tax Act. 7. Rent receipts should include details such as the names of the tenant and landlord, rent paid, landlord's signature, and PAN details. Read Also: Counting Calories and Currencies: Budget 2024 Halwa Ceremony and Lock in Period This comprehensive guide aims to shed light on the intricacies of HRA exemptions, emphasizing the importance of proper documentation and adherence to established legal provisions. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Here’s How You can Claim HRA Exemption on Rent Paid to Spouse

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