Things to Keep in Mind When Paying Rent to Relatives

There are various reasons family members allow relatives to stay in their homes. Sometimes it is the way to ensure security of second property as unknown tenants don’t take care of the home as their own. In some situations it is just a way to provide help of financially weaker relative who cannot afford high rent in metro cities. Whatever is the reason, you must be careful when paying rent to relatives.

Though it is more important for the landlords to be careful when renting out property to relatives as it can affect their tax rebate, as a tenant you should also pay attention to a few things. There are many real estate sites in India which talk about the preventive step landlords should take when renting home to a relative. Most of them are concerned about the tax benefits and ask the home owners to:

Structure the property in a way to prove it’s a rental property as in opposite situation it is considered personal use home

Ask for down payment and advance to avoid any problems in future

Clear all the things regarding payment of rent in advance to protect your relation from getting bitter in future

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What about the tenants living at a relative’s home? So here are some tips for those paying rent to relatives:

Rent should be as per the market trends: No matter how great is your relative’s house, you should always pay as per the market trends. Even if you are living in an area with the best real estate in India, you have complete right to pay reasonable rent. So make sure you first confirm the prices in market to get an idea of industry trends.

Enter into an agreement: Making things clear in advance is better than fighting over petty issues later. So like any other tenant ask relatives to make an agreement. Get everything mentioned in it clearly so that neither you nor your relative feels awkward about discussing the things.

Pay through legal banking channels: If you want to enjoy HRA tax benefits, try to pay rent through legal banking channels. You can either transfer the amount through net banking or can pay through cheque to keep payment record.

Keep records if rent is paid in cash: If you don’t want to get into the hassle of net banking or other methods and prefer paying rent in cash, make sure to keep records. You can either ask for a rent receipt or can get it written. It helps you when you file an ITR and claim for tax deduction on house rent.

If you explore some of the best property websites in India, you will definitely come across some posts on this topic. Being a tenant, you also need to be careful, and when staying at a relative’s house, paying attention to some minor things can save you from various issues in future. 

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