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Can You Claim Both, HRA as well as Home Loan Benefits?

17 Aug 2016

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Can You Claim Both, HRA as well as Home Loan Benefits?If you are living in a rented apartment and also servicing a home loan, you can claim tax exemption for both house rent allowance (HRA) and repayment of home loan (principal and interest) under separate sections of the Income Tax Act. However, there are certain conditions that you need to fulfil before you can do so. Let’s have a look.


Exemptions and Deductions

While exemption for HRA can be claimed under section 10(13A) of the Income Tax Act, the principal repayment of your home loan and the interest on it can be claimed under sections 80C and 24b respectively.


 - Principal repayment exemption can be claimed up to the limit of Rs.1.5 lakh as mentioned under section 80C, or the actual principal repaid, whichever is lesser.


 - Interest repayment can be claimed up to the threshold limit of Rs. 2 lakh as mentioned under section 24b (for a self-occupied property) or actual interest paid on home loan, whichever is lesser.


 - If the house you own is rented out, you can claim the entire interest you pay on the home loan as deduction.


According to rule 2A of the income tax rules, HRA can be claimed as:


 - Lowest of actual HRA received from the employer OR


 - 50% of the salary for employees living in metro cities or 40% for those residing in cities other than metro OR


 - Actual rent paid minus 10% of salary (basic + dearness allowance + turnover based commission).


Keep in mind:


 - If you bought a house by taking a home loan and you also live in it, then you will not be able to claim HRA, but only tax benefits on both the principal and interest.


 - If you bought a house by taking a home loan and live in another house on rent, you will be able to claim tax benefit for both.


 - If the house you bought and the house you live in are in the same city, you should have a genuine reason for not living in the house you own.


Authored by Goel Ganga Developments, one of the leading Real Estate Builders and Developers in Pune

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