Can rent paid to a spouse be claimed as a deduction against HRA allowance?

Claims of rental paid to spouse as a deduction against House rent allowance (HRA) have been a matter of debate since its inception. While it has been a general trend by the employees to claim their rent as a deduction against their HRA allowance but still the doubt pops out when some order is passed or when some case is highlighted where such claim was rejected by the Income-tax authority just because this whole transaction of rent was executed between the taxpayer and their spouse.

So to just rest this uncertainty and calm your anxiety we would like to make you aware of the law which oversees all transactions (i.e.., Income Tax Act, 1961). (You may skip to the next para to avoid the language of law) Section 10 (13A) of the Income Tax Act clearly states “ any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed55 having regard to the area or place in which such accommodation is situated and other relevant considerations.

Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—

(a) the residential accommodation occupied by the assessee is owned by him; or

(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him;”

Let me interpret the above law for you. It says that a taxpayer can claim the deduction against their HRA allowance if they fulfil the below mentioned two conditions:-

1. The residential accommodation where you live (of which you are claiming the rent) must NOT BE owned by you.
2. You should have actually incurred the expenditure on payment of rent in respect of such residential accommodations.

So going by the above law it can be safely said that a rent paid by the taxpayer to his spouse can be claimed against the HRA allowance that he gets from the employer if he fulfils the above condition. (i.e.., the spouse must own the house property (Condition first checked) and the taxpayer must have actually paid the rent to the spouse (Condition second checked).  

And to strengthen your claims of HRA you must also maintain the below documents to reflect the legitimacy of your claim:-

1.  Rent Receipts with proper revenue stamps.
2. Properly executed rent agreements.
3. Bank statements reflecting the amount transferred as rent to the spouse.
4. Property ownership documents must be in the name of the spouse.

So from now onward you may freely claim your rentals (paid to spouse) against the HRA allowances keeping in mind the above checkpoints. And in case you need any assistance in the calculation of your eligible HRA claim or if you need assistance in any field of accounts, law and finance you may reach out to us in the below-given IDs and number

Note: Above conclusion has been reached by reading the act in harmony with the judgments passed in “Bajrang Prasad Ramdharani vs ACIT dtd 12.07.2013”, Abhay Kumar Mittal vs DCIT & Meena Vaswani vs ACIT”. In the future departments or courts may take a contrary view and tax such claims.

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You may find our other blogs below:

Key Changes in New notified ITR Forms: Click here
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Source Info: https://www.incometax.gov.in./