Central government employees can claim HRA benefits by paying rent to spouses; check details here

Not many might be aware but central government employees can avail tax benefits on House Rent Allowance (HRA) with a well-woven rent agreement with their spouses. Under the 7th Pay Commission, the central government employees are entitled to get HRA. As easy as it may sound, claiming HRA benefits is a process that needs to be dealt with carefully. There are a few pointers that one needs to consider before you apply for the benefit in order to prevent your claims from being denied. Here’s how you can enjoy HRA exemptions by entering into an agreement with your spouse. Rent Agreement You and your spouse must enter into a rent agreement where you must regularly pay rent to your spouse and in return, get the receipts of the exchange. These receipts should contain the tenant’s name, landlord’s name, amount, date of payment, house address, PAN of landlord (your spouse), and revenue stamp. These receipts need to be submitted by the taxpayer, along with the rent agreement and Form 12BB. Source of Income To prevent disallowance, it is imperative that your spouse has an independent source of income other than the rent received. This will prove that the rent agreement is legit and not some instrument to reduce tax liability. In addition, the rent income earned by your spouse must be declared in the ITR of your spouse. The ITR must be filed even if your spouse falls below the basic exemption limit. Ownership of The House To make this system work, your spouse must be the sole owner of the house. The house should not even be partially owned by you. In a case where the house property that your spouse owns is funded through a loan where you are the co-applicant, it is advisable to loan money to your spouse so that they can repay the house loan to the bank. Moreover, the couple going ahead with such a system must calculate their combined tax liability to analyse whether the arrangement reduces or increases the overall tax liability. This should be done especially when both the spouses are under the same tax bracket. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.