You can lower your income tax liability by claiming exemption on the house rent allowance (HRA) you receive as part of your salary even if you pay rent to your spouse. In fact, The Income Tax Appellate Tribunal, Delhi, recently ruled that HRA exemption under the Income-Tax Act cannot be denied on the ground that the assessee paid rent to his spouse.
This means that a wife can pay rent to her husband and claim HRA exemption. Similarly, a husband can pay rent to his wife and claim the relief under the provisions of the income tax law in India. However, the I-T department may decline your claim if it senses you were committing an elaborate fraud to save taxes. This makes it pertinent to keep in mind certain rules.
Property must be in the name of spouse
If you show to your employer that you pay monthly rent to your spouse, you will have to show her ownership of the property as well. If she is a joint owner of the property, she can receive rent according to her ownership in the property.
In case a husband gifts their property to their wife, they will not be able to claim HRA exemption since the property will remain the possession of the husband if the wife has not paid money to purchase it.
You have to actually pay the rent
Be ready to provide documentary proof that you actually pay the rent to your spouse. Their account statement reflecting the monthly rent deposit is good enough for this purpose. You can also generate rent receipts for each quarter and submit it with your HR department.
No shared accommodation
If you are living with the spouse in the said house, it may be tricky to claim the HRA exemption. In the capacity of the tenant, you can’t possibly share the accommodation with the landlord. You will also have to establish that you live separately.
Also check: Can you claim HRA on rent paid to parents?
