Summary of this article
HRA benefits are only available under the old tax regime
Rent agreement is not mandatory to get HRA benefits but here are the documents you need to show
For salaried employees, claiming tax benefits on house rent allowance (HRA) is a key component of planning your taxes. But for many, the process and conditions required to claim such tax rebates can be confusing. One such topic of confusion that commonly arises is whether a formal rent agreement is needed for one to claim tax rebates under HRA.
Understanding the key documents needed to claim a rebate on HRA can be essential.
Is a Rent Agreement Mandatory
No, a formal rent agreement is not a mandatory requirement to claim tax benefits on HRA. “The Income Tax Act does not make a rent agreement compulsory for claiming HRA. But you must have proof that rent was actually paid to the landlord,” Ruchita Vaghani, a chartered accountant, said in a post on X.
There are several documents that you can provide to substantiate HRA claims if you do not have a formal rent agreement. For these documents to work, proof that you have paid rent must be added.
For this purpose, rent receipts, or records of online or bank payments made to the landlord, could work. However, if the annual rent paid exceeds Rs. 1,00,000, then the landlord’s name and PAN must also be provided. In case the landlord refuses to provide their PAN, Form 10BA must be provided by the taxpayer, stating the reason.
Exceptions
The first and foremost requirement to claim benefits on HRA is that the taxpayer must opt for the old tax regime. As per the amendments made to the Income Tax Act in 2025, HRA benefits are no longer available under section 115BAC.
Even for individuals opting for the old tax regime to claim benefits, there are certain exceptions where one cannot claim HRA benefits.
1. Paying rent to family members: If one is paying rent to family members and is creating artificial claims through circular transactions, HRA cannot be claimed. However, it is not fully barred. Individuals who are genuinely paying rent to parents or family members can still claim HRA benefits. For this to work, the rent must be paid through proper banking channels. Additionally, the family members receiving this rent must report the income made through rent on their tax return filings.
2. If you own the house: Taxpayers living in a house they own cannot claim benefits on HRA. For this purpose, individuals are not eligible to claim both HRA benefits as well as home loan interest for the same property, unless the individual owns the house in a different city and lives in a rented property somewhere else.
