Paying rent to wife (HRA)?

If you have the agreement and paying taxes electronically. .. then it's ok to pay rent and claim it as HRA

Dear sir,

If you are taking all the above precautions, legally its ok to claim HRA.

However, due to the very close relationship of husband and wife, IT department sometimes disagree with the HRA and in that case you may have to fight it out in the tribunal. However, the chances of IT department challenging this HRA is low.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Please ensure that you enter into a registered rent agreement.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Hi,

Though it is legally allowable, there is a high risk of losing the HRA benefit in case of Scrutiny. She is your wife and obviously you both will be living together in same house.

Recently, Mumbai ITAT has disallowed HRA claim towards Rent paid to Mother

At max, in your case the IT can add back to your income. But this is remote chance, as you are offering to tax that income in your wife account.

No sir you can not pay rent to your wife and claim HRA since income of wife in that case shall get clubbed to you only and you can not get any benefit.

The Paper that need to be taken care is

1. To prepare a Rental Agreement.

2. The payment should be by Account payee cheque or transfer and not CAsh.

3. You need to prove a point to the department that the Rent is actually paid and taxes on the same is also paid.

4. If they Reject than there will not be penalty as the transaction is done in a genuine way and oly HRA will be disallowed and taxes paid

Hi,

You have to take all the precautions as mentioned by you. Even then, there is high possibility of the HRA claim being rejected if your case is picked for Scrutiny.

If IT Dept rejects HRA Claim, then you will have to pay Tax on the HRA Deduction disallowed and Interest u/s 234B and/or 234C.

Penalties are usually levied only if there is any mala-fide intention to defraud the Revenue. There is a Penalty Section 270A, which prescribes a penalty of 50% of Tax Amount (in case of under-reporting of Income) or 200% of Tax Amount (If there is any misreporting of Income).

For claiming HRA, there is no problem if you pay rent to your wife on reasonable terms.

However, you should ensure that the investment in the house was made by your wife out of her resources and not from funds provided by you. Otherwise, her income will be clubbed in your hands.

Hello Sir,

All the documentation required is put in place by you. I request you to also pay all the utility bills from your account, like electricity, telephone bills, gas bill etc to prove that you have rented the property.

The Income Tax department will not penalise your wife but if the HRA is disallowed then you may be liable for interest and penalty.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Hello Sir,

In order to avail deduction for the same do also start paying the utility bills like electricity bill, telephone bills, society maintenance, gas bill etc in order to prove that the house was used and maintained by you.

Regards

Keerthiga Padmanabhan

M.Com., CA, LLB