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ITR filing: Many employees either claim income tax deduction on HRA or on home loan repayment. There are only a few who are aware that they can claim both these deductions together. If you are eligible to claim tax deduction on HRA or on home loan repayment simultaneously then you must do so as what's the harm in getting some tax benefits on your hard earned salary. 

House Rent Allowance (HRA) and tax benefit related to HRA

HRA is a component received by salaried taxpayers to bear the rental payment. It is allowed as an exemption from taxable salary under section 10(13A) of the Income-tax Act, 1961 (the Act) on satisfaction of several conditions. 

Amit Gupta, MD, SAG Infotech says it is the easiest way to claim both HRA and home loan deductions at the same time. Firstly, you must meet the requirements for HRA, which include being employed and receiving HRA as a salary deduction. A person may be exempt from House Rent Allowance (HRA) in accordance with Section 10(13A) of the Income Tax Act, 1961 ('Income-tax Act'), if two conditions are met, namely that the expenditure is actually incurred for the payment of rent for residential accommodation and that the residential accommodation is occupied.

Anshu Agarwal, Finance Head (India) of Branch International says the Income tax department do allow you to claim both if you can prove that you cannot stay in your own house. "The own house is not in the same city where you are currently working. If you are working in the same city it’s a hassle to travel from your own house to your work place or the kids school is far off and it’s a challenge to travel every day. You have rented out your own house to someone else in which case you will have to disclose this as your income," he said.

“A taxpayer living in the same city where he or she has bought its own home through home loan can also claim both HRA and home loan tax benefit if the loan borrower has to live in a rented house due to distance, size or any other valid reason that is acceptable to the income tax department of India," says Sudhakar Sethuraman, Partner, Deloitte India.

Archit Gupta, Founder and CEO - Clear explains four scenarios where you can claim HRA and home loan tax benefits together

1) Owns a house in one city but lives on rent in another city

When the taxpayer owns a house in one city, say ‘A’ but lives on rent in another city ‘B’, he shall be entitled to the claims of all the home loan benefits and HRA exemption.

2) Owns a house in one city but lives on rent in the same city

The taxpayer owns a house property in one city but lives on rent in the same city for reasons related to his employment, like longer commute hours to work. In such cases, the taxpayer is eligible to claim the HRA and home loan benefits if he can prove he had genuine reasons to do so.

3) Lets-out own house on rent and lives on rent in the same city

When the taxpayer lets out his own house on rent and lives on rent elsewhere owing to reasons like proximity to the workplace, children's school or any other genuine reasons. In this case, the deduction upto Rs. 1,50,000 under Section 80C for principal repayment of home loan shall not be available. The taxpayer can claim all other interest-related deductions and HRA exemption.

4) House under construction and lives on rent elsewhere

The taxpayer has serviced a loan for his house, which is under construction, and he lives in a rented accommodation elsewhere in the same city. In such a case, the taxpayer can claim the HRA exemption and all other deductions related to the home loan except the interest under section 24(b). He can claim this deduction on interest paid once the construction is completed over the next five years in equal installments.

 

 

ABOUT THE AUTHOR

Sangeeta Ojha

Sangeeta is a Chief Content Producer at Livemint. Writes on personal finance, banking and real estate. She has over 12 years of experience as a journalist with television and digital media
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