Rent Paid to Parents for HRA: Net Tax Saving Calculator

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Rules checked on 16 October 2026 on incometaxindia.gov.in in the Income-tax Act, 2025 as amended by the Finance Act, 2026: section 19 (standard deduction on a pension: ₹75,000 under the new regime, ₹50,000 under the old; checked 19 October 2026), section 21 (annual value, municipal taxes paid by the owner), section 22(1)(a) (30% deduction) and (1)(b) (loan interest), section 24 (co-owners taxed on their share), section 156 (rebate), section 393(1) Table Sl. No. 2(i) (2% TDS on rent above ₹50,000 a month), and the HRA rule (Schedule III Sl. No. 11 with rule 279, Income-tax Rules, 2026). The HRA figures match the department's own HRA calculator on two test sets. Slab rates from the CBDT Tax Reference Tables. Every figure on this page was recomputed by hand on 16 October 2026 (docs/calc-tests) and matches the calculator.

Short answer

Mumbai, ₹25 lakh salary, ₹1 lakh basic, ₹50,000 HRA a month, ₹60,000 rent to a retired parent with a ₹4.5 lakh pension: your exempt HRA is ₹6,00,000 and your old-regime tax drops from ₹4,99,200 to ₹3,12,000. Your parent's rent income is ₹4,95,600 after municipal tax and the 30% deduction. Under the new regime their total is ₹8,70,600 (the pension less ₹75,000, plus the rent), which the section 156 rebate covers, so they pay nothing. But without the rent your new-regime tax would have been ₹3,19,800, so the family gains ₹7,800 a year, far less than the ₹1,87,200 drop in old-regime tax suggests. If the parent stays on the old regime, they pay ₹92,680 and the family ends up ₹84,880 worse off.

Your saving and your parent's tax come from the same rupees

On your side, the rent makes part of your HRA exempt under the old regime: the lowest of the HRA you get, rent minus 10% of basic pay, and 50% of basic in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad (40% anywhere else). The new regime ignores HRA altogether.

On your parent's side, the rent is income from house property. Take the rent, subtract the municipal tax the owner actually paid that year, and you have the annual value. Then 30% of that comes off as a flat deduction, along with any interest on a loan taken for that house. What's left is added to the parent's other income and taxed at their slab.

So the plan is worth it only when your tax falls by more than your parent's rises. A parent with little other income, who files under the new regime, often pays nothing, because the section 156 rebate covers total income up to ₹12 lakh. A parent with a large pension can pay as much as you save.

Measure the gain against the new regime

Most write-ups compare your old-regime tax with and without HRA. That overstates the gain, because without the rent you would probably file under the new regime instead. In the Mumbai case above, the HRA cuts the old-regime tax by ₹1,87,200, but the old regime only beats the new one by ₹7,800 once the rent is in.

Mumbai, ₹25 lakh salary, ₹60,000 rent to a parent: tax for the year

Bars drawn to scale. Taxes include the 4% cess. The gain is ₹3,19,800 − ₹3,12,000 = ₹7,800 if the parent pays nothing extra.

The calculator does this comparison for you: the first figure is the family's gain against your lower-tax choice without the rent. If the old regime still loses even with the HRA, it says so.

Who owns the house decides who pays

The rent is taxed in the owner's hands. If both parents own the house in definite shares, each one reports their share of the rent, the municipal tax and any loan interest (section 24), so one parent's large pension may only touch half the rent.

Some conditions sit outside the arithmetic. The rent has to be for a home you actually live in, paid from your account to your parent's, at a rent the house would fetch. You can't pay rent for a home you own or co-own. If the yearly rent is above ₹1,00,000, your employer needs the landlord's PAN and your relationship with the landlord on Form 124. Above ₹50,000 a month, you deduct 2% TDS once, from the March rent or the last month of the tenancy, and your parent claims credit for it.

Worked examples

Mumbai, retired parent, new regime vs old regime

Aditi earns ₹25 lakh a year in Mumbai: basic ₹1,00,000 and HRA ₹50,000 a month. She claims ₹2,25,000 of other deductions (₹1,50,000 under section 123, NPS and health insurance). She pays her father ₹60,000 a month for the flat he owns; he pays ₹12,000 a year in municipal tax and draws a pension of ₹4,50,000 a year.

Her exempt HRA is ₹6,00,000: rent minus 10% of basic is ₹7,20,000 − ₹1,20,000, and 50% of basic is also ₹6,00,000. Her old-regime tax falls from ₹4,99,200 to ₹3,12,000. Her new-regime tax would be ₹3,19,800.

Her father's annual value is ₹7,20,000 − ₹12,000 = ₹7,08,000. Less 30% (₹2,12,400), the rent adds ₹4,95,600 to his income. Under the new regime his pension counts as ₹3,75,000 after the ₹75,000 standard deduction, so his total is ₹8,70,600. That is below ₹12 lakh and the rebate takes his tax to zero; the family gains ₹7,800. Under the old regime the deduction is ₹50,000 and his total is ₹8,95,600: his tax goes from nil to ₹92,680 and the family loses ₹84,880. Aditi also deducts ₹14,400 TDS from the March rent.

Pune, house owned by both parents

Rohan earns ₹30 lakh in Pune: basic ₹1,25,000 and HRA ₹62,500 a month, other deductions ₹3,50,000. He pays ₹70,000 a month for a house his parents own half each, with ₹20,000 a year of municipal tax. His exempt HRA is ₹6,90,000 (rent minus 10% of basic binds), and his old-regime tax falls to ₹4,00,920, against ₹4,75,800 under the new regime.

Each parent gets ₹4,20,000 of rent and pays ₹10,000 of the municipal tax, so each adds ₹2,87,000 to their income. His father draws a ₹14,75,000 pension, ₹14 lakh after the standard deduction, and pays ₹49,300 more under the new regime. His mother has no other income and pays nothing. The family gains ₹25,580.

If the house were in his mother's name alone, the whole ₹5,74,000 would be hers, still under the rebate limit, and the gain would be ₹74,880.

Tips and tricks

Start with the family gain. The old-regime saving looks large, but the gain is measured against your new-regime tax.
Try the parent's regime both ways. "Whichever is lower" picks it for you, but seeing the old-regime number shows how much depends on that choice.
Use the rent table under the result to see where your exemption stops growing; rent above that point adds to your parent's income only.
If the house is jointly owned, pick "Both parents" and enter each income separately. One parent's pension can change the answer.
Type your parent's pension before any deduction. The calculator takes off ₹50,000 for the old regime and ₹75,000 for the new one, so "Whichever is lower" compares each regime with its own deduction. A family pension has a different deduction: enter it under other income, after that deduction.

How we would use it

Questions people ask

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

Yes, under the old regime, if your parent owns the house, you live there and the rent is actually paid. The exemption is the lowest of your HRA, rent minus 10% of basic, and 50% or 40% of basic. Your parent must show the rent as income from house property.

How much tax does my parent pay on the rent?

The rent minus the municipal tax they paid, less 30%, is added to their income. On ₹60,000 a month with ₹12,000 of municipal tax, that is ₹4,95,600. Under the new regime nothing is due if their total income stays within ₹12 lakh; under the old regime a senior with a ₹4.5 lakh pension would pay ₹92,680.

Does this work under the new tax regime?

Not for you. The new regime taxes the whole HRA, so the rent saves you nothing there. Your parent can still choose either regime for their own return.

Do I need my parent's PAN?

Yes, if the rent is above ₹1,00,000 for the year. Your employer collects the landlord's name, address and PAN, and your relationship with the landlord, on Form 124.

Do I have to deduct TDS on rent paid to my parents?

Only if the rent is above ₹50,000 a month. Then you deduct 2% of the rent once a year, from the March rent or the last month of the tenancy, under section 393(1). Your parent gets credit for it.

What if both my parents own the house?

Each co-owner is taxed on their share of the rent, after their share of the municipal tax and the 30% deduction (section 24). Choose "Both parents, half each" in the calculator and enter each parent's pension and other income.

Is the rent counted in my parent's income in full?

The full rent goes into the return, but only 70% of the rent after municipal tax is taxed, because section 22 allows a flat 30% deduction. Loan interest on that house comes off too.

Written by Bulan Sarkar, who checked the results by hand and against a second public calculator. Use it for planning; it isn't tax or investment advice.

Sources

HRA Exemption Calculator

See how much of your house rent allowance is tax-free under the 2026-27 rules, with the three limits worked out on your numbers.