Save Tax with HRA Exemption if You're Paying Rent for Parents

The ITR filling is all set to start on April 1, 2025, for the Annual year 2025-26. Once the online forms and offline utilities are available on the e-filing portal, a notification will be issued on the income tax website. It is important to note that the last date to file ITR is July 31, 2025. Taxpayers, who are keen on minimizing their tax liabilities, can make use of the House Rent Allowance (HRA), which can significantly reduce your tax burden.

Can we claim an HRA exemption for rent paid to parents?

Salaried individuals receiving HRA as part of their cost to the company (CTC) can claim exemptions on rent paid to their parents. But, certain conditions need to be met:

Proof of Residency and Rent Payment:

Those who are willing to be exempted must ensure that they are living on the property owned by their parents and make timely payments.

Must possess a valid rental agreement:

A legally binding rental agreement should be present and the payments should be transferred to your parents' bank account.

Parents must declare in their ITR:

Parents are required to declare the received rent as income in their filing of the ITR.

However, the rent amount should be in line with prevailing market rates. Inflated rent amounts may attract scrutiny from tax authorities.

How to calculate your HRA exemption?

The HRA exemption you can claim is the lowest of the following three amounts:

1) The actual HRA received from your employer

2) 50% of (Basic Salary + DA) if you are a resident of a metro city or 40% of (Basic Salary + DA) if you are a resident of a non-metro city

3) Actual rent paid - 10% of (Basic Salary plus DA)