Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
It's allowed, with conditions
Paying rent to a parent is a legitimate way to claim HRA — but only if the arrangement is real. The parent must own the property (you cannot pay rent for a house you co-own and live in), you must actually transfer the rent, and the parent must report it as income. The tax department disallows arrangements that exist only on paper.
Why it can still save tax
It often works well where a parent is in a lower tax bracket (or below the exemption limit): you get the HRA exemption, and the rent is taxed lightly — or not at all — in their hands, after the 30% standard deduction on rental income. Keep a rent agreement, receipts and bank transfers as evidence. Set a market rent, not an inflated one, to stay defensible.
A worked example
Example: you pay your mother ₹25,000 a month by bank transfer for the flat she owns and you live in. You claim HRA on ₹3 lakh of rent; she reports ₹3 lakh rental income, deducts 30% (₹90,000) automatically, and pays tax on the rest at her slab — which may be nil if she is a homemaker. The family saves overall, legitimately. Our team can set it up correctly.