Can i claim HRA and interest on housing loan?

Wondering to know

can we claim HRA and home loan.

Yes, we can claim both House Rent Allowance (HRA) and the tax benefit on the interest paid on your housing loan. Though it is subject to certain conditions and limitations.

1. House Rent Allowance (HRA):

If you are a salaried person and you receive HRA as a part of your salary, you can claim tax benefits on the HRA amount.

• You must be living in a rented house and paying rent.

• HRA should be a part of your salary structure.

• The rent paid should exceed 10% of your basic salary.

• You cannot claim HRA exemption if you are living in a house owned by yourself or a close relative.

The least of the following three amounts is exempt from income tax:

• Actual HRA received.

• 50% of your basic salary (or 40% in case you live in a non-metro city).

• Excess of rent paid over 10% of your basic salary.

1. Interest on Housing Loan:

Under Section 24(b) of the Income Tax Act, you can claim a deduction on the interest paid on your housing loan.

Before knowing can we show home loan and HRA together, you should know that the loan should be taken for the purchase or construction of a house.

• The property should be self-occupied or vacant.

• The maximum deduction allowed on the interest paid is ₹2 lakh per year for a self-occupied property.

• If you have a second property that is not self-occupied, there is no upper limit on the interest deduction.

This is how

can HRA and home loan be claimed together.

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“Can I claim HRA and interest on housing loan?” is a common query for salaried taxpayers. The answer to this query is yes. If you are paying back your housing loan and getting HRA as part of their salary, then you can avail both of these property-related tax benefits to lower your taxable income. In case you work in one city and stay in a rental flat there and buy a house in another city where your family lives, then you can claim:

• Principal Repayment under Section 80C
• Deduction on housing loan interest as per Section 24
• HRA exemption towards rent payment

Let me answer your “can you claim both HRA and home loan tax exemptions” query using an example: Let’s assume Pourush stays in Gurugram and pays a rent of Rs. 10K per month and receives an HRA of Rs. 15K. His basic monthly salary is Rs 40K. He has availed a loan to purchase a home in Bengaluru where his parents currently stay. The interest he pays on the loan for his home is Rs 20K per month. The amount of tax exemption from HRA will be a min. of these 3:

• Rent paid – 10 percent of Basic Salary = Rs.10K – Rs. 4K = Rs. 6K
• 40 percent of Basic Salary since he stays in Gurugram = Rs. 16K
• HRA received = Rs. 15K

Therefore HRA exemption will be of Rs. 6K. The remaining HRA of Rs 15K– Rs 6K = Rs. 9K will become a part of his taxable income. Now, the income from the property and claiming interest on home loan deduction will be allowed a given below:

• Property’s Gross Annual Value = Nil (because his parents stay in the house property)
• Less: Deduction on Interest on home loan = Rs 2L (limited to Rs. 2L for a self-occupied home)
• Net Loss under the ‘Income from House Property’ head = (-) Rs 2L

Now, this will get added to his taxable income. Note: You can’t claim HRA exemption if you are staying in a different home in the same city while having a Self Occupied Home in the same city. Read more: Can you pay rent to my parents and claim HRA How can you claim HRA for your own home What is exempted from income tax? Who are exempted from income tax? I hope you like my answer to your “can I claim HRA and interest on housing loan” query.

If you are wondering Can I claim HRA and interest on housing loans? The answer is yes! The HRA is an allowance that the employer pays to an employee to cover the cost of the rented house. If an employee lives on his own he cannot claim HRA as he does not have to pay any rent. But an employee can claim for tax exemption for house rent and home loan if the house he has purchased is located in a different city and the house he is paying rent for is located in another city. There are some key points you need to keep in mind before concluding can we claim both HRA and interest on housing loan. 

  A homeowner can claim both HRA and home loans under conditions such as:

• Exempted HRA towards rent payment.

• Home loan deduction under Section 24.

• Repayment of principal according to section 80C.

  Can a person claim both HRA and interest on housing loan

1. You can claim HRA and home loan interest both at the same time.

2. Only salaried employees can claim HRA and home loan interest together.

3. Your HRA should be a part of your salary to get this benefit.

4. You can deduce your tax by renting a place in a different city and purchasing a property in another city.

5. You must show support evidence to HRA and home loan interest.

 

I will give an example to make the idea clear

 

Diya works in Hyderabad, and she has purchased her home in Noida. Her monthly basic salary is Rs. 50,000. She gets an HRA of Rs 25,000 per month. As she is working in Hyderabad, she has to rent a house which costs Rs. 12,000 at the same time she has to pay a home loan.In this situation, she can claim her HRA and home loan as she is renting a place in Hyderabad for her job while she has also purchased a house in Noida.

 

Diya can claim her HRA on the basis of- the amount of tax exempted will be a minimum of these three :

 

1. She receives an HRA of Rs.25,000 x 12 = Rs. 30,00,000 p.a.

2. The 50% of basic pay she receives is Rs. 30,00,000 p.a.

3. The rent paid annually is Rs.12,000 x 12

   – 10% of salary [(Rs. 50,000 x 12)]= Rs. 84,000

   .

 

The home loan interest she paid was Rs. 2.5 lakh in that year. So she was able to claim HRA deduction under

Section 10(13A) or Section 80GG

as well as exemption on home loan interest under Section 24 while filing Income Tax Return. 

 

Hope you know now how can I claim HRA and interest on housing loan.

 

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