If you belong to the middle or lower class, then it is quite possible that you send money home every month. But many people do not know a way to save tax from the money they send home. You can make your income up to Rs 99,000 tax-free by paying rent to your parents every month, and your parents will also not have to pay tax on this rent.
Sushmit Lala lives in his own house with his family in Delhi. Therefore, he is not able to avail the tax exemption on house rent allowance. Later, one of his friends Ankit Mishra suggested that why don’t he pay rent to his parents. This will make his income up to Rs 99,000 tax-free annually. When Mishra told Lala this method, Ankit was surprised whether this is really possible. If you are also having the same question in your mind, then this story is for you.
If you belong to the middle or lower class, then it is very possible that you send money to your home every month. But many people do not know a way that they can also save tax from the money they send home. You can make your income up to Rs 99,000 tax-free even by paying rent to your parents every month, and your parents will also not have to pay tax on this rent.
Pay rent of Rs 8,333 every month
No matter how much rent you pay outside, if you pay rent of Rs 8,333 every month to your parents, then you will get two benefits. Firstly, you will be able to avail the tax exemption on house rent allowance. Second, your income of about Rs 99,000 will become tax-free.
There will be no tension of tax
Now you will also be worried that the tax of the rent paid by you may be recovered from your parents. So let us tell you that this will not happen. Actually, in the tax exemption available on house rent allowance, the details of the landlord (in this case your parents) such as PAN card are not required to be given to the Income Tax Department for rent up to Rs 8,333 every month. In such a situation, this income can be tax-free for them too.
Let us tell you that the benefit of tax exemption on house rent allowance can be availed only in the old tax system. In this, the tax exemption limit is up to Rs 5 lakh. Whereas in the new tax system, the tax exemption limit is up to a maximum of Rs 7,50,000. In that, you do not get the benefit of tax exemption on house rent allowance, other savings.
