How to claim HRA on rent paid to parents

Is a rent agreement necessary for claiming house rent allowance exemption if you pay rent to your parents? — Krishan Kumar As per the provisions of Section 10 of the Income-tax Act,1961, house rent allowance exemption is not available where the accommodation occupied by the assessee is owned by him or the assessee has not actually incurred expenditure on payment of rent. Though there is no specific list of documents prescribed, the employer may also ask for details like rent agreement, rent receipts, mode of payment, etc., before allowing this deduction. In case the tax return is selected for scrutiny, the tax officer may • Registered and notarized rent agreement, as applicable •Rent receipts •Payments via banking channels • Cash payments backed by known sources / traceable to specific withdrawals from the bank account •Disclosure of rental income in landlord’s ITR It is worthwhile to note that claiming of HRA exemption in respect of rental payments made to parents / spouse/ relatives may be prone to litigation, thus it is important to maintain adequate supporting documentation to substantiate the genuineness of such transactions.