HRA Exemption for Airbnb, Hostels, and Hotels in India

House Rent Allowance (HRA) is one of the most effective ways for salaried individuals to save taxes. However, a common question many taxpayers have is whether they can claim HRA exemption for a rented hotel room, an Airbnb, or a long-term hostel stay like Zostel. While the Income Tax Act provides clear guidelines on HRA exemptions, the rules regarding non-traditional accommodations require a closer look.

This article explains the provisions of HRA under Section 10(13A) of the Income Tax Act, the eligibility criteria, practical ways to save taxes, and the dos and don’ts of claiming HRA for a rented hotel, Airbnb, or hostel room.

Understanding HRA and Its Exemption Under Section 10(13A)

HRA is a component of salary paid by an employer to employees who live in rented accommodations. The Income Tax Act, 1961, allows salaried individuals to claim HRA exemption under Section 10(13A), subject to conditions specified under Rule 2A of the Income Tax Rules.

The amount of HRA exemption is calculated as the least of the following three amounts:

• Actual HRA received from the employer.
• 50 percent of salary (for those living in metro cities: Delhi, Mumbai, Chennai, Kolkata) or 40 percent of salary (for non-metro cities).
• Rent paid minus 10 percent of salary.

Here, salary includes basic salary plus dearness allowance (DA) (if part of retirement benefits) plus commission (if paid as a percentage of sales turnover).

 

Can You Claim HRA for a Rented Hotel Room, Airbnb, or Hostel Stay?

The Income Tax Act does not explicitly prohibit claiming HRA for a rented hotel, Airbnb, or hostel stay. However, for HRA exemption to apply, the accommodation must qualify as a rented house and must be used as a primary residence.

In practical terms, staying in a hotel or Airbnb temporarily (for a few days or weeks) does not qualify as a “rented house” under HRA rules. However, long-term stays in Airbnbs, Zostels, and hotels may qualify if specific conditions are met.

Examples of Long-Term Stays That May Qualify for HRA

1. Long-Term Airbnb Stay

• Suppose you rent an Airbnb apartment in Bengaluru for six months while working remotely.
• The Airbnb host provides a rental agreement and monthly invoices or receipts for rent paid.
• You pay rent via bank transfer instead of cash.
• You use this accommodation as your primary residence for the period.
• In this case, you may be eligible for HRA exemption.

2. Hostel Stay in Zostel or Similar Co-Living Spaces

• You book a private room in Zostel in Mumbai for eight months as your primary residence while working in the city.
• The hostel management issues monthly rent receipts and a rental agreement.
• The rent is paid through digital banking modes.
• If all required documents are available, this setup may be considered for HRA exemption.

3. Long-Term Stay in a Hotel (With a Rental Agreement)

• You stay in a hotel in Gurugram for seven months because of your job location.
• The hotel offers a special long-term rental plan with monthly rent receipts instead of daily invoices.
• The payments are made through a bank transfer.
• If the tax department accepts it as a residential arrangement, you may be able to claim HRA.

When HRA Cannot Be Claimed for Such Stays

• Short-Term Stays (Less than a Month): Temporary accommodation in a hotel or Airbnb for a few days or weeks is considered a commercial service and does not qualify for HRA exemption.
• Daily Rent Receipts Without a Long-Term Agreement: If you do not have a valid rental agreement and only receive daily hotel invoices, it is unlikely to be accepted for HRA exemption.
• Cash Payments Without Proof: If rent is paid in cash without bank records or official receipts, it will not qualify for tax deduction.

Practical Ways to Save Taxes on Rent (Including Airbnb and Hostel Stays)

1. Get a Proper Rental Agreement

If you are staying in an Airbnb, hostel, or hotel for a long period, negotiate a rental agreement instead of daily invoices. A rental agreement provides stronger legal backing for an HRA claim.

2. Ensure Rent is Paid Through Banking Channels

Pay rent via bank transfer, UPI, cheque, or demand draft rather than cash. This ensures that rent payments are traceable in case of a tax audit.

3. Submit Rent Receipts and PAN Details of the Landlord

To claim HRA, you must submit rent receipts to your employer. If your annual rent exceeds ₹1,00,000, you must also provide the PAN of the landlord, Airbnb host, or hostel operator.

4. Use Section 80GG If You Are Not Eligible for HRA

If you are a self-employed individual or your employer does not provide HRA, you can claim a deduction under Section 80GG, subject to:

• Not owning a house in the city where you are working.
• Not claiming HRA in any financial year.
• Maximum deduction: ₹5,000 per month or 25 percent of total income, whichever is lower.

Dos and Don’ts for Claiming HRA on Airbnb, Hostel, or Hotel Stays

Dos

• Ensure your stay is long-term (six months or more).
• Get a written rental agreement from the host, hotel, or hostel management.
• Collect rent receipts with proper details.
• Pay rent through bank transfers or digital modes to maintain records.
• Keep proper documentation and proofs in case of scrutiny by tax authorities.

Don’ts

• Do not claim HRA for short-term hotel or Airbnb stays.
• Avoid paying rent in cash, as it may lead to rejection during tax assessment.
• Do not forge rent receipts—income tax officers may conduct inquiries or ask for proof of stay.
• Do not claim HRA and a home loan tax deduction if you own a house in the same city (unless you have a valid reason for renting).

Final Thoughts: Can You Claim HRA for an Airbnb, Hostel, or Hotel Stay?

While there is no strict prohibition against claiming HRA for an Airbnb, Zostel, or long-term hotel stay, the Income Tax Department assesses such claims cautiously. If you have a long-term rental agreement, proper rent receipts, and are genuinely using the accommodation as a residence, you may be eligible. However, short-term stays do not qualify for HRA exemption.

For taxpayers uncertain about whether their rented accommodation qualifies, consulting a tax expert can help ensure compliance and optimize tax savings.

Need expert guidance on HRA and rental tax deductions? Get in touch with a tax consultant today.