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GigglyPotato
GigglyPotato
Slice

Faking HRA

I recently started my job(2023 grad), a lot of senior folks at my firm are (indirectly) stating that they fake hra. Is it safe? Should I also consider doing it? Let's say I live in city A and my parent live in city B can I give my parents id as landlord?

17mo ago
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FluffyNarwhal
FluffyNarwhal
Amazon17mo

If you're paying rent to your parents - you're not faking an HRA claim.

The logic for HRA is that if you pay income tax on an amount of money, then pay it to a landlord (whoever) and they pay income tax on it, it's double taxation.

So if you're paying your parents rent, and they're declaring that as part of their income, you're not faking anything in your HRA claim, because it's a legitimate claim.

GigglyPotato
GigglyPotato
Slice17mo

But they live in a different city and my mom is a house maker so she'll have to pay zero taxes after declaring it as income (< 7lpa).

I was reading the Clauses and for hra you can claim hra only for your city of occupation

SqueakyMochi
SqueakyMochi
Stealth17mo

I would like to shift your perspective a bit and not call this "faking"

As per the IT Act, if you declare rent of less than one lakh per year (8333 per month) you do not have to provide your landlord's PAN details. Which means the IT dept does not know whom that rent is going to as income. This is a provision and not a loophole. Therefore it isn't faking

If you declare rent of >1LPA, then you will have to provide landlord's PAN details. It will reflect in the Landlord's Income tax portal as income to them. If either of your parent has <2.5L per annum as income, you can quote that you are paying them rent. And they will then not have to pay taxes

Again - this is not faking. It is a provision under the IT Act

GigglyPotato
GigglyPotato
Slice17mo

Makes sense. But can we claim hra even if they've property in a different city than our city of residence? And what if I am claiming hra of around 7lpa?

SqueakyMochi
SqueakyMochi
Stealth17mo

Of course you can pay rent anywhere. It doesn't have to be in the city where you work in (since remote/partially remote workers exist, consultants and bankers who travel for work all do this)

FluffyNarwhal
FluffyNarwhal
Amazon17mo

@PotatoPooper I can't reply to my own comment because this app is still pretty buggy - but your situation is still completely legal, no faking going on.

You are paying rent to your parents, who own the property you are residing in, therefore you can claim HRA. What income level your mom has and how much tax she pays at the end of the day is immaterial to your own calculations.

GigglyPotato
GigglyPotato
Slice17mo

Yes I know but my issue is that they have property in a different city.. Isn't there rule which states that we can claim hra only for the city of residence?

CosmicWaffle
CosmicWaffle
Stealth17mo

Also, ig the property should be registered with you mother then you can give her pan. Correct me if I’m wrong

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