You can earn tax-free income of Rs 99,000 by paying rent to your parents every month.Image Credit source: File Photo
Vishal Sharma lives in his own house with his family in Delhi. Therefore, he is not able to take advantage of the tax exemption available on house rent allowance. Later one of his friends advised that why he does not pay the rent to his parents only. With this, he will be able to make income up to Rs 99,000 tax-free annually. But how will this happen and will their parents not have to pay tax on this rent?
So the solution that Vishal Sharma found, we are going to tell you here. With this, you will be able to make your income of about one lakh rupees tax-free, and your parents will also not have to bear the tax burden of this rent income.
Give rent of Rs 8, 333 to parents every month
No matter how much rent you pay outside, but if you pay rent of Rs 8,333 to your parents every month. Then you will have two advantages. One, you will be able to take advantage of the tax exemption available on house rent allowance. Secondly, your income of about Rs 99,000 will be tax-free.
Tax burden will not come on parents
Now you will also have a worry that tax on rent paid by you may not be recovered from your parents. So let us tell you that this will not happen. In fact, the details of the landlord (in this case your parents) such as the PAN card are not to be given to the Income Tax Department for the rent of up to Rs 8,333 per month in the tax exemption on house rent allowance. In such a situation, this income can also be tax-free for them.
Let us tell you that the benefit of tax exemption on house rent allowance can be availed only in the old tax regime. In this, the tax exemption limit is up to Rs 5 lakh. Whereas in the new tax regime, the tax exemption limit is up to a maximum of Rs 7,50,000. In that you do not get the benefit of house rent allowance, tax exemption on other savings.
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