Can I claim HRA if I pay rent to my parents?

The four conditions

The exemption is not a loophole — it is the ordinary HRA exemption, and it survives scrutiny when four things are true. First, the property must be owned by the parent you pay, not by you. Second, the rent must actually move: a monthly bank transfer is far stronger evidence than cash. Third, your parent must report that rent as income from house property in their own return, where the standard 30% deduction for house property applies against it. Fourth, you must not be the owner or co-owner of the home you are claiming rent on.

The provision itself has a new address. It was Section 10(13A) of the Income-tax Act 1961; the Income-tax Act 2025 moves it into Schedule III (Table Sl. No. 11) from tax year 2026-27, read with Rule 279 of the Income-tax Rules 2026, with the same three-limb calculation. Returns for earlier years still cite 10(13A), and a Form 16 or employer portal may use either number for a while. The conditions above do not change with the numbering.

What gets these claims disallowed in practice is not the arrangement itself but the paperwork: no rent agreement, round-sum cash "payments" with no trail, or a parent who never declared the income. Treat it exactly as you would a claim against an unrelated landlord.

The proof to keep

Keep a written rent agreement between you and your parent, monthly bank transfers referencing rent, and rent receipts. If your annual rent exceeds ₹1,00,000 you must report your landlord's PAN to your employer — your parent's PAN, in this case. Keep your parent's filed return as well, since it is the single document that shows the other side of the transaction was declared.

From tax year 2026-27 that declaration to your employer is Form No. 124, under Rule 205 of the Income-tax Rules 2026. Its first line asks for the "Name, address and Permanent Account Number of the landlord or landlords, where the aggregate rent paid during the tax year exceeds ₹ 100000 and relationship with the landlord, if any." For rent paid to a parent, that means your parent's PAN and the relationship itself are stated on the form, so the arrangement is visible to your employer from the start rather than discovered later.

How much is actually exempt

The exemption is the LEAST of three figures, not whichever one you prefer: the HRA you actually receive, your rent minus 10% of your basic salary plus DA, and 50% of basic+DA in the eight cities named in Rule 279(1)(c) (Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru) or 40% everywhere else. That last split changed on 1 April 2026: before then only the first four were 50% cities, and Hyderabad, Pune, Ahmedabad and Bengaluru were 40%.

Take basic+DA of ₹50,000 a month with HRA of ₹25,000 and rent of ₹20,000, in a 40% city such as Jaipur. The three limbs are ₹25,000, ₹15,000 and ₹20,000, so ₹15,000 a month is exempt — ₹1,80,000 across the year — and the remaining ₹10,000 a month is taxable. Raise the rent to ₹30,000 and the limbs become ₹25,000, ₹25,000 and ₹20,000, so the 40% cap now binds and ₹20,000 a month is exempt. In the same case in one of the eight 50% cities, the third limb rises to ₹25,000 and the full ₹25,000 becomes exempt.

The direction of the maths is worth noticing: because one limb is rent minus 10% of salary, a rent below 10% of your basic+DA produces an exemption of exactly zero, no matter how large your HRA component is.

Only under the old regime

Under the new regime, HRA exemption is not available at all. So this question only changes your tax if you are on the old regime, or deciding between the two. Run both on your own numbers before assuming the exemption is worth having — for many salaries in FY 2026-27 the new regime still wins even after HRA is counted, and for others it does not.

Put the worked example on a ₹12,00,000 gross salary. Under the old regime, the ₹1,80,000 exemption plus a full ₹1,50,000 of 80C leaves taxable income of ₹8,20,000 and tax of ₹79,560. Under the new regime the same salary pays nil, because taxable income of ₹11,25,000 is inside the ₹12,00,000 rebate limit. On that salary the rent arrangement changes nothing unless the old regime is already the cheaper one for other reasons.