Relationship between husband and wife is not commercial and based on this concept it was a settled rule that rent paid to wife can not be claimed as a HRA or House Rent Allowance exemption.
As per the income tax act, employee can not claim HRA or House Rent Allowance exemption if he is the owner of such accommodation or he is not paying any rent for the rented accommodation.
How about paying rent to wife who is the owner of the house and husband does not have any control on the ownership. In such case one can argue by saying, as both husband and wife are living in one house it can not be concluded that husband is not the owner and he is really paying rent to wife.
Recently in the case of Bajrang Prasad Ramdharani Vs Ass CIT, it was held that to claim exemption under section 10(13A) you need to satisfy two conditions;
- You should have occupied the house and
- Paying rent
Since in this case the taxpayer was fulfilling both the conditions, ITAT has held that he is liable to get house rent allowance exemption under section 10(13A) of income tax act.
Earlier to this only rent paid to parents or brothers were allowed as HRA exemption by employers. Now tribunal has extended this benefit to the rent paid to wife.
If your wife owned a house and you both are living together then rent paid to your wife can be claimed as HRA exemption. While doing so certain things are required to remember;
- Rent paid to your wife will be charged to income tax under the head income from house property in the hand of your wife if it is exceeding the basic exemption limit of income tax.
- If your wife is working and the house has been bought by her then their will not be any issues and tax needs to be paid by her.
- If she does not have income and the house has been bought by you in her name then the entire rent paid to her will get clubbed in your hand as your income.
- If rent paid to your wife is more than Rs. 15000 per month then she needs to get a PAN card in her name. You need to produce the pan card copy and rent receipt to your employer for claiming exemption for house rent allowance.
As per the notification of CBDT, if your house rent payment is less than equal to Rs.3000 then you need not required to produce any rent receipt to your employer. But you keep a copy of such receipt along with you to claim the benefit in future if it is asked for.