Keep it in the family (legally)
If you live with your parents in a house they own and you receive HRA in your salary, you can pay them rent and claim the HRA exemption under the Old Regime. It is legal — but the department watches these claims closely, so do it by the book.
The number on the parents' side
Your parents can claim a flat 30% standard deduction on the rent they receive as house property income (Source: Section 24(a), Income Tax Act).
| Rent you pay to parent | 30% standard deduction | Taxable in parent's hands |
|---|---|---|
| ₹2,40,000/year | ₹72,000 | ₹1,68,000 (before other set-offs) |
The golden rules
- They must own the home: you cannot pay rent to a parent who is themselves renting it.
- You cannot be a co-owner: if your name is on the deed, you cannot pay rent to yourself.
- Pay by bank transfer: monthly NEFT/UPI with a "Rent for [month]" note builds an undeniable trail. No cash.
- Sign a rent agreement: a formal agreement between you and your parent(s).
- Collect rent receipts: ask your parents to sign monthly receipts.
The tax impact on parents
This is the part people skip: the rent becomes your parents' taxable income. They report it under "Income from House Property", claim the 30% standard deduction plus any property tax, and pay tax on the rest.
If your parents are in a lower bracket (or have little other income), the family saves overall. If a parent is already in the 30% bracket, the strategy can increase the family's total tax — so check first.
What you should do
- Confirm the home is legally in your parent's name and you are not a co-owner.
- Set up an automatic monthly bank transfer with a clear remark.
- Compare your tax saving against the extra tax your parent pays.
Common mistake
Paying "rent" in cash with no agreement. Without a bank trail and paperwork, the claim collapses under scrutiny and can be reversed with interest.
How LastMinute ITR helps
Before committing, you need to know if the HRA exemption is even worth it. LastMinute ITR calculates your exact HRA exemption from your salary structure, shows it in your deductions, and compares regimes. You then file and e-verify on incometax.gov.in.