Budget 2024: Can You Claim HRA Exemption on Rent Paid to Your Spouse? What Can Change in This Time Around

Budget 2024: There are a lot of anticipation that the finance ministry may boost some of the exemption limitations in the lead-up to the Budget 2024, which would lower the tax burden. One of the most significant tax deductions is the house rent allowance (HRA), which is available to anyone, regardless of home ownership. Put another way, as long as it comes from your pay, you are still eligible to receive a house rent allowance even if your spouse owns the property.

New Tax System Restriction

Notably, under the new tax system, the HRA exemption is not allowed. Therefore, you must only use the previous tax system if you wish to claim the tax exemption for rent allowance. Learn more about the main HRA exemptions by familiarising yourself with the following information.

There are six important HRA exemption rules to be aware of

• Under the HRA, rent paid to a spouse may be claimed as an exemption (home rent allowance).
• The Income Tax Appellate Tribunal (ITAT) ruled in Aman Kumar Jain's case in June 2023 that the rent paid by the man to his wife will be permitted as HRA and will not be subject to an exemption. This decision is based on a number of court rulings. “The contention that the husband cannot pay rent to the wife is devoid of any legal implication supporting any such contention," the ruling had said. 
• As with any other landlord-tenant relationship, it is advised that the husband and wife sign a rent agreement and that the wife give the husband rent receipts.
• It is also necessary for the wife to include the rent in her income. She should still file the tax even if her income is below the taxable threshold.
• The husband shouldn't possess a portion of the property; the wife should own the whole thing.
• The taxpayer must provide his employer with Form 12BB, the rent agreement, and rent receipts in order to claim HRA and avoid paying taxes.
• Tenant, landlord, amount of rent paid, landlord's signature, and PAN should all appear on the rent receipt.

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