Tax Dilemma: Can Both Working Spouses Claim HRA Exemption When Filing ITR?

Hi friends, if both the husband and wife are working, can both take an exemption for HRA when filing ITR, or can only one person take the benefit?

Hi, no one alone can avail an exemption for HRA. When submitting investment proofs at the office, your HR will ask for a self-declaration that as an employee, you are the sole beneficiary of the benefit, and if your spouse is working, they are not availing the exemption. Employers take such declarations to safeguard their side. For salaried cases, the same information will reflect in Form 16, and therefore, you cannot manipulate anything during individual IT filing.

Hi Rakesh,

In the case where both the husband and wife are working and living in rented accommodation, the question often arises as to whether both individuals can claim an exemption for House Rent Allowance (HRA) in their respective Income Tax Return (ITR) filings, or if only one person is eligible to take the benefit. This is a common query among taxpayers, and it is important to understand the rules and regulations governing this matter.

Eligibility for HRA Exemption

According to the Income Tax Act, 1961, if both the husband and wife are working and living together in rented accommodation, they can both claim the HRA exemption in their individual ITR filings. However, there are certain conditions that need to be met in order to avail of this benefit.

Conditions for Claiming HRA

Firstly, both individuals must be paying rent for the accommodation in which they reside. The rent paid should be in accordance with the terms and conditions of the rental agreement and should be supported by proper documentation such as rent receipts or a rental agreement.

Thanks

Income Tax rules and HRA exemptions

The current Income Tax rules are explicit, so companies do not want to take a risk. They ask for copies of the agreement for rent, PAN card, and proof of payment of rent (rent receipt). Few HR departments today ask for a declaration of the other partner not taking HRA exemption. Ultimately, the liability for tax is of the employee, not the company, as long as the latter took adequate care to decide the total deduction of TDS.

Some people have split the rental agreement, having both husband and wife separately have agreements for the same flat and paying the rent separately. In such cases, they may be able to get away with getting exemptions twice.

Restrictions on HRA exemption

But remember that HRA exemption is restricted to the lower of:
- HRA
- Actual Rent
- 50% of salary

So splitting the rent may not resolve the problem in all cases.

The person who is paying the house rent can only avail of the tax exemption.

Yes, both can claim exemption subject to conditions as follows:

Conditions for HRA Exemption

01. The Leave and License/Rent agreement must be in both names.

02. The rent/license fees should have been paid from an individual bank account.

03. Only the payment made from the individual bank account would be eligible for HRA exemption.

04. If payment is made only from one bank account and claimed 50-50 by individuals, it will not be allowed.

Under the new tax regime, HRA exemption is not allowed.