Yes, you can claim HRA on rent paid to your parents if the arrangement is genuine: you actually pay the rent, a parent owns the home and reports the rent as income, and you are on the old tax regime. Updated for tax year 2026-27: four more cities now get the 50% HRA limit, and the employer declaration form has changed. Work out your own numbers with the HRA calculator.
Can You Claim HRA on Rent Paid to Parents?
Yes, if the arrangement is genuine. You must actually pay the rent, a parent must own the home, and they must show the rent as income in their tax return. The law only requires that you pay rent for a home you don’t own; it doesn’t bar a parent as landlord, and income tax tribunals have allowed such claims when the paperwork was in order. There is no CBDT circular on it, so treat documentation as essential.
The exemption is in section 10(13A) and Rule 2A for FY 2025-26, and in section 11 with Schedule III of the Income-tax Act 2025 and Rule 279 of the Income-tax Rules 2026 from tax year 2026-27.
Who Can Use This?
- Salaried employees who receive HRA as part of their salary
- Living in a home owned by one or both parents (not one your parents rent from someone else)
- Filing under the old tax regime
HRA exemption is available only under the old tax regime, in both FY 2025-26 and tax year 2026-27. Under the new (default) regime your HRA is fully taxable, however much rent you pay.
How Much Tax Can You Save?
The tax-free part of your HRA is the lowest of three amounts:
- The HRA you received from your employer
- Rent paid minus 10% of your salary
- 50% of salary in a listed city, or 40% anywhere else
“Salary” here means basic pay plus dearness allowance if your employment terms include it.
Which cities get 50%?
| Year | 50% of salary | 40% of salary |
|---|---|---|
| FY 2025-26 | Mumbai, Delhi, Kolkata, Chennai | Everywhere else |
| Tax year 2026-27 onwards | Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad | Everywhere else |
The Income-tax Rules 2026 added Bengaluru, Hyderabad, Pune and Ahmedabad from tax year 2026-27. Nearby areas such as Gurugram, Noida, Thane and Navi Mumbai aren’t named, so they stay at 40%.
Example 1: Bengaluru, rent is the limit
| Detail | Amount |
|---|---|
| Basic salary | ₹60,000/month (₹7.2L/year) |
| HRA received | ₹24,000/month (₹2.88L/year) |
| Rent paid to parents | ₹20,000/month (₹2.4L/year) |
| Rent − 10% of salary | ₹1.68L |
| City limit | ₹2.88L at 40% (FY 2025-26); ₹3.6L at 50% (2026-27) |
| Tax-free HRA | ₹1.68L in both years |
| Tax saved (30% slab + 4% cess) | About ₹52,416 a year |
Here the rent, not the city, sets the limit, so Bengaluru moving to 50% doesn’t change the result. It would if the rent were higher.
Example 2: Mumbai, higher salary
Basic ₹1,00,000 a month, HRA ₹50,000 and rent to parents ₹50,000: rent minus 10% of salary is ₹4.8L, below both the HRA (₹6L) and 50% of salary (₹6L). Tax-free HRA is ₹4.8L, which saves about ₹1.5 lakh a year in the 30% slab. Savings above ₹1 lakh are realistic only at this kind of salary and rent.
Step-by-Step: How to Do This Correctly
Step 1: Set a realistic rent
Keep the rent in line with what similar homes in the area rent for. Tax officers have questioned claims where the rent looked inflated or out of line with the family’s circumstances.
Step 2: Sign a rent agreement
A simple agreement between you (tenant) and your parent(s) (landlord) should state the property address, monthly rent, period and both signatures. Stamp duty and registration rules for rent agreements vary by state, so check what yours requires.
Step 3: Pay by bank transfer every month
This is the most important step. Pay by UPI, NEFT or cheque, not cash. Cash rent isn’t banned, but it’s hard to prove, and a bank trail is your best evidence that the arrangement is real.
Step 4: Keep rent receipts
Your parent should give you a receipt each month or quarter with the date, amount, property address, both names and their signature. Some employers also ask for a revenue stamp on receipts above ₹5,000; that’s a stamp-duty practice, not an income-tax requirement.
Step 5: Declare it to your employer
Submit receipts to payroll, usually in January. If the rent is more than ₹1,00,000 a year (about ₹8,333 a month), you must give your parent’s PAN. The declaration is on Form 12BB for FY 2025-26. From tax year 2026-27 it’s Form 124, which asks for the landlord’s name, address and PAN (when rent is above ₹1 lakh) and your relationship to them. The Income Tax Department’s Form 124 FAQs say the landlord’s Aadhaar isn’t needed unless your employer asks for it. If your employer didn’t apply the exemption, you can still claim it in your return under the old regime.
Step 6: Your parents report the rent
Your parents must show the rent as “Income from house property” in their return. They can deduct municipal taxes paid and then get a 30% standard deduction on what remains. If they’re in a low or nil tax bracket, the family pays little or no extra tax, while you save at your slab rate.
What If Your Parents Own the House Jointly?
You can pay rent to both, and each declares their share in their own return, which can lower the tax on the rental income further. Keep the agreement and payments consistent with who owns what.
Common Mistakes to Avoid
- Paying in cash, which leaves no proof
- No rent agreement or receipts
- Not giving your parent’s PAN when rent is above ₹1 lakh a year
- Parents not reporting the rent in their return
- Paying rent to your spouse: these claims usually fail because tax officers don’t accept them as genuine when you share the home, not because of any specific ban
- Claiming it while on the new tax regime
Bottom line: pay rent to the parent who owns the home by bank transfer, keep an agreement and receipts, give their PAN if rent is above ₹1 lakh a year, and make sure they report it. Check your exemption for 2026-27 with the HRA calculator.
