Do you have to forego HRA exemption to claim interest deduction on home loan?

I am currently working with a company in Chennai and live in a rented house against which I claim a tax exemption from the House Rent Allowance (HRA) in my salary. I want to buy a house in my hometown in Telangana where my parents can live and I also intend to move back in a few years.

Can I get any tax benefits for purchase of a house even if I don’t live there? If yes, will I have to forego the exemption benefit of HRA which I am currently getting?

- Name withheld on request

A general confusion among salaried people is whether they will have to forego the exemption benefit of House Rent Allowance (HRA) received from their employer to claim a deduction of interest on their home loan.

Since you are currently claiming the tax exemption for HRA, you must have opted for the old tax regime.

When a taxpayer owns a house property in respect of which he services a home loan but resides in a different city owing to work or any other justifiable reason, he may be entitled to claim the following benefits in Income Tax under the old tax regime:

i) Tax exemption basis section 10(13A) of Income Tax Tact for rent paid against HRA received from his employer

ii) Deduction from taxable income (up to ₹2 lakh a year) under section 24(b) of the Income Tax Act for interest paid on the home loan of the owned property

iii) Deduction from taxable income (up to ₹1.5 lakh a year) under section 80C of the Income Tax Act for principal repayment of the home loan for the owned property

However, none of the above benefits is available if a person has opted for the new tax regime introduced in the financial year 2020-21.

(Query answered by Amit Bhachawat, CFO, India Mortgage Guarantee Corp. If you have any personal finance queries, write to mintmoney@livemint.com to get them answered by experts.)