Income Tax: Rent paid to spouse can be claimed as HRA exemption; here are 6 key provisions

In the run up to the Budget 2024, there are expectations galore that the finance ministry could perhaps raise some of the exemption limits, which would reduce the tax burden.

Among tax exemptions, one of the important ones is house rent allowance (HRA) which one can claim regardless of who owns the house. In other words, even if the house is owned by your spouse, you can claim a house rent allowance so long as it is part of your salary.

Notably, the HRA exemption is not permitted in the new tax regime. So, in case you want to claim the tax exemption for rent allowance, you must stick to the old tax regime only.

If you want to know more on HRA exemption, understand the key exemptions here as follows.

Six key provisions relating to HRA exemption to know

A. Rent paid to spouse can be claimed as exemption under HRA (house rent allowance).

B. It has been decided in several court verdicts – including the recent one in June 2023 by the Income Tax Appellate Tribunal (ITAT) in Aman Kumar Jain’s case where the Tribunal ordered that the rent paid by man to his wife will be allowed as HRA and exemption will be allowed for it. “The contention that the husband cannot pay rent to the wife is devoid of any legal implication supporting any such contention,” the ruling had said.  

ALSO READ: How to claim HRA benefit by paying rent to your wife

C. It is recommended that the husband and wife enter into a rent agreement and the wife issues rent receipts to the husband just as in any other landlord-tenant agreement.

D.  It is equally imperative that the wife declares the rent in her income. Even if her income is below the taxable threshold, she should still file the tax.

E. The wife should own the entire house and the husband should not be the part owner.

F. In order to claim tax exemption, the taxpayer has to submit the rent agreement, rent receipts along with Form 12BB to his employer to claim HRA. 

G. Rent receipt should bear the names of tenant, landlord, rent paid, landlord’s signature and PAN.