Maximizing HRA Tax Benefits: How to Save ₹1.8 Lakh Without Paying Rent

Many salaried employees are unaware that they can claim House Rent Allowance (HRA) tax exemption even without paying rent to a traditional landlord. The Income Tax Act allows individuals to pay rent to their parents or relatives and still qualify for HRA benefits, provided they meet specific conditions. To ensure compliance, the house must not be owned by the claimant, rent payments should be made via bank transfer, and a formal rent agreement must be in place. Additionally, the rent received by parents or relatives must be declared in their Income Tax Return (ITR). The exempted HRA amount is determined by the lowest of three factors: actual HRA received, total rent paid minus 10% of salary, and 50% of salary for metro cities or 40% for non-metros. By following these guidelines, individuals can legally optimize their tax savings while maintaining financial transparency.