House Rent Allowance (HRA) under Section 10(13A) is commonly claimed by salaried individuals for tax exemption. However, some misuse this provision through sham transactions and fake receipts. This article examines the admissibility of HRA paid to parents or spouses based on judicial rulings.

Executive Summary

House Rent Allowance u/s. 10(13A) is the commonly availed exemption by the salaried people. However, many assessee often use this tool to evade the taxes. Often time assessee engages in sham transactions basis fake rent receipts and claim the exemption of HRA to deceive tax authorities.

HRA Paid to Parents-Spouse

Further in some cases assessee may engage in transaction with his/her spouse or parents with respect to payment of rent and avail the benefit of HRA. These types of transactions are often subject to litigation as there is question of substance and genuineness of transaction versus mere legal form of transaction. In this article, admissibility of HRA paid to parents/spouse is discussed with reference to judicial rulings.


Section 10(13A) of the Income Tax Act provides that any allowance granted by employer to assessee employee to meet the expenditure incurred on payment of rent in respect of residential accommodation occupied by the assessee shall be exempt subject to limits prescribed. However, the exemption shall not be available in cases where:

1. Residential accommodation occupied is owned by the assessee.

2. Assessee has not incurred any expenditure on payment of rent in respect of residential accommodation occupied by him.

Therefore, the essential elements to claim the HRA exemption are as follows:

1. Allowance in nature of HRA should be paid by employer. Where salary structure does not contain any allowance in nature of HRA, question of claiming exemption does not arise.

2. Residential accommodation occupied by assessee should not be owned by him. It can be owned by any other person. Noted that the section does not expressly prohibits that exemption would not available if accommodation is owned by parents/relatives of assessee.

3. There must be payment of rent from assessee to the owner of accommodation. Section does not mention anything on the mode of payment. Neither there is any prohibition on the payment made in cash/other than account payee cheque.

As far as the admissibility of rent paid to parents/spouse is concerned, different appellate tribunal has given different rulings, as under.

Bajrang Prasad Ramdharani vs ACIT (ITA No 715/Ahd/2013), Ahmedabad Tribunal

Facts of the cases

Assessee has claimed exemption of HRA u/s. 10(13A) on the basis of rent paid to his wife. Ld. CIT(A) has confirmed the addition on the ground that assessee and his wife were living together in the same house and very fact that the assessee tenant and landlord were staying together indicates that the whole transaction is in nature of colorable device to evade taxes.

ITAT Observation.

Tribunal has made below observations.

  • AO has given the finding that assessee and his wife were living together as family in same house.
  • It can be inferred that house owned by wife of assessee is occupied by the assessee.
  • Assessee has submitted the rent receipts and payments were made by bank transfer.
  • Therefore the assessee has fulfilled the twin condition of the section that is payment of rent and occupation of house.

Tribunal therefore allowed the claim of assessee in respect of rent paid to his spouse.

Aman Kumar Jain vs DCIT (ITA 267/Del/2023), Delhi Tribunal

Facts of the case:

Assessee has claimed the HRA exemption in respect of rent paid to his spouse. AO disallowed the said exemption and stated that wife of assessee has no other income except the rent received from assessee.

Findings of ITAT.

  • Tribunal observed that wife of assessee has filed her return of income filed and has shown income from business and other sources in addition to rent income.
  • The assessee has paid rent to his wife and wife has declared the said rent as income in her return of income and the said return was also accepted by the revenue authorities.
  • The house in respect of which exemption is claimed is registered in name of wife of assessee and she has procured the same by way of loan from banks and payment of installment and interest are made by her only.
  • Tribunal therefore allowed the claim of assessee by relying on the order of Delhi Tribunal in case of Abhay Kumar Mittal vs. DCIT (ITA No. 3385/Del/2019) wherein it was held that

“ The Id. CIT (A)’s contention that the husband cannot pay rent to the wife is devoid of any legal implication supporting any such contention. Hence, keeping in view the entire facts of the case, we hereby allow the appeal of the assessee”.

Meena Vaswani vs ACIT (1983/Mum/2015), Mumbai Tribunal

Facts of the Case

Assessee has claimed exemption in respect of rent paid to her mother. The rent was paid in form of cash. Further the assessee had also claimed deduction u/s. 80C in respect of housing loan repayment and loss from house property in respect of “Self Occupied House Property”.

Assessing officer rejected the claim of assessee basis:

  • Return of Income furnished by the assessee contains the address of the self-occupied house property. Also in all other identification cards, same address was mentioned.
  • Inspection report carried out of AO provides that assessee was not staying with her mother in house in respect of which HRA exemption is claimed but she was staying with her husband in accommodation which was claimed as “Self-occupied House Property”.

Findings and Decision of Tribunal

Tribunal has disallowed the claim of the assessee and held that the transaction was mere sham and entered into to evade the tax liability. Tribunal has made below observations.

  • Assessee has not entered into any formal lease and license (rent agreement) with her mother.
  • Entire rent was paid in cash and not banking channel. Further the bank account shows minimal cash withdrawal from her bank account and also could not establish the reconciliation of cash withdrawals and corresponding rent payment in form of cash.
  • No return of Income has been furnished by the mother of assessee declaring the rent received from the assessee.
  • Inspector has submitted the report after making personal visit to respective accommodation and making due enquiries from the watchman and secretaries.
  • Assessee could not produce any other evidence apart from rent receipts such as letter to society intimating about her tenancy, electricity bill payments through cheque, water bill payments through cheque to prove the genuineness of the transaction.
  • Also assessee could not produce any other evidence which proves that she was staying with her mother.


Claim of HRA exemption in respect of rent paid to relatives/spouse/parent is a subject of litigation. It depends on the basis of facts and circumstance of each case. However, the decision of Mumbai Bench in case of Meena Vaswani (sited supra) can be taken in form of brief guidelines to decide admissibility of claim.

Assessee should have necessary corroborative evidence in support of claim made by him/her.


Disclaimer The article is the comprehensive analysis of decision of various appellate forums on the allowability of HRA. This should not constitute any legal or professional advice in any manner whatsoever.

Author Bio

Qualification: CA in Practice
Company: Agarwal Shubham & Associates
Location: Surat, Gujarat, India
Member Since: 26 Feb 2023 | Total Posts: 4

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