Question: I reside in a property singly owned by mother. I pay rent to her and have been claiming HRA deduction for past 7 years. I pay rent through online bank transfer, take rent receipts, provide my mother’s PAN for HRA deduction to my employer, renew the rent agreement every year and my mother shows the rental income in her IT return.
We are planning to sell the current house and buy a new house. The new house will be financed by the proceeds of the old house and my mother’s other Savings (which include the rent I have been paying her). Now, considering that she is old and I don’t want to go through the legal hassles of getting the name transferred into my name after her death, we wish to get my name included as a joint owner in the newly purchased property.
Since I will not be paying a single rupee towards the purchase price of the property, can I still continue paying rent to my mother after we move into the new house where I am a joint owner of the property? Will I be eligible to claim the HRA exemption on such rent payment? – Tapas
Answer: As per Section 10(13A) of the Income Tax Act, there are certain conditions which one has to satisfy for claiming the tax benefit of House Rent Allowance.
First, you should be in receipt of HRA from your employer. So in case your employer does not give you any HRA or you are a self-employed person, you can not avail the HRA benefit. Secondly You should be paying the rent for the house occupied by you. So in case you are paying rent for the house occupied by your parents, you cannot claim the HRA benefits.
And lastly the house for which you are paying rent should not be owned by you. Since the new house will be funded fully by your mother and your name only will be added as a joint owner for succession purpose, you would be a joint owner technically only. It is your mother who will be full owner of the house. Since you would not be beneficial owner of the house proposed to be purchased, I do not see any reason why you should not be entitled to claim HRA benefit in respect of rent which you will pay to your mother as there is no restriction on claiming the HRA benefits by paying rent to your parents.
Balwant Jain is a tax and investments expert and can be reached at email@example.com
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