{"id":75860,"date":"2023-10-05T17:49:33","date_gmt":"2023-10-05T12:19:33","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?post_type=income-tax&p=75860"},"modified":"2024-05-24T12:10:44","modified_gmt":"2024-05-24T06:40:44","slug":"claim-hra-deduction-home-loan-interest","status":"publish","type":"income-tax","link":"https:\/\/enterslice.com\/learning\/income-tax\/claim-hra-deduction-home-loan-interest\/","title":{"rendered":"Can You Claim Both HRA And Deduction On Home Loan Interest?"},"content":{"rendered":"

General confusion among the salaried arises regarding whether they will forego the exemption benefit of the House Rent Allowance received from the employer to claim a deduction of interest on their home loan. A short answer to this is NO. One may claim both HRA exemption and interest deduction on a home loan subject to the condition that certain requirements, as per the Income Tax Act, 1961<\/a><\/strong>, are met. In this article, we aim to offer a detailed explanation regarding all possible scenarios and the amount one can claim, both HRA exemption and interest deduction on a home loan.<\/p>\n\n\n\n

What is HRA?<\/h2>\n\n\n\n

HRA (House Rent Allowance)<\/a><\/strong> is a special allowance paid by an employer as a part of one’s salary to meet the rental expenses of accommodation in a city.<\/p>\n\n\n\n

Conditions for Claiming HRA Exemption<\/h2>\n\n\n\n

Under both the new and old regime of the Act, HRA is fully taxable in the employee’s hands. However, in the old regime, he may claim exemption of such an allowance under Section 10(13A) of the Act to lower their taxes if all the following conditions are fulfilled:-<\/p>\n\n\n\n

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  1. The taxpayer should be a salaried employee<\/li>\n\n\n\n
  2. HRA is given as a part of the salary<\/li>\n\n\n\n
  3. The taxpayer must reside in rented accommodation<\/li>\n\n\n\n
  4. Rent receipts or rental agreement is given to the employer<\/li>\n\n\n\n
  5. If rent paid by the employee is greater than INR 1,00,000 per annum, he must give the landlord’s PAN<\/a><\/strong> to his employer. In the absence of PAN, the landlord must provide a declaration to this effect, which the employee should file with his employer.<\/li>\n\n\n\n
  6. If the landlord is a Non-resident Indian, a tax of 31.2% (base rate of 30% plus a cess of 4%) has to be reduced at the source before making the rent payment.<\/li>\n<\/ol>\n\n\n\n

    Maximum HRA exemption one can claim<\/h2>\n\n\n\n

    The taxpayer receives only a partial exemption in respect of the HRA received. The HRA exemption available will be the least of the following:-<\/p>\n\n\n\n

      \n
    1. Actual allowance received for the relevant period or<\/li>\n\n\n\n
    2. Rent paid is 10% of the salary for the relevant period; or<\/li>\n\n\n\n
    3. For the relevant period, 40% of salary and 50% for rented accommodation in Delhi\/Mumbai\/Kolkata\/Chennai).<\/li>\n<\/ol>\n\n\n\n

      The “Relevant Period” means the period during which the taxpayer occupied the said accommodation during the year. If a person occupies different accommodations for different periods, we split the year into parts and then calculate the exemption for such parts separately.<\/p>\n\n\n\n

      Tax Benefits on Home Loans<\/h2>\n\n\n\n

      Where a taxpayer is serving a home loan for the acquisition or construction of a house property<\/a>, the taxpayer is eligible to avail various tax benefits such as tax deduction on:-<\/p>\n\n\n\n

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      1. Under section 80C<\/strong> of the Act – Principal repayment of home loan,<\/li>\n\n\n\n
      2. Payment of interest under section 24(b) of the Act, and<\/li>\n\n\n\n
      3. Under section 80EEA or 80EE of the Act- Payment of interest.<\/li>\n<\/ol>\n\n\n\n
        Tax deduction<\/td>Amount of Benefit<\/td>Provision under the Act<\/td><\/tr>
        Principal repayment of the loan (includes any pre-payment amount)<\/td>Up to INR 1.5 lacs<\/td>80C<\/td><\/tr>
        Interest Payment<\/td>Rented property: Actual Interest with no limit Self-occupied property: INR 2 lacs or INR 30,000 if certain conditions prescribed are not met.<\/td>24(b)<\/td><\/tr>
        Interest Payment<\/td>INR 50,000 or INR 1.5 lacs<\/td>80EE or 80EEA respectively<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

        Tax Deduction on principal repayment of loan<\/h2>\n\n\n\n

        The maximum deduction a taxpayer can claim regarding principal repayment of a loan for construction or purchase of a house property is INR 1.5 lakhs. Stamp duty and registration charges may also be claimed under the same limit only once for that particular loan.<\/p>\n\n\n\n

        Note: When the taxpayer sells or transfers the house prior to the expiry of five years from the end of the Fiscal Year(FY)<\/strong><\/span>1<\/sup><\/a><\/span> in which the construction was completed or the purchase was made, the deductions allowed previously will be summed up to his income in the year of sale.<\/p>\n\n\n\n

        Tax Deductions on interest under section 24(b) of the Act<\/h2>\n\n\n\n

        A taxpayer can claim a deduction on interest paid or payable regarding a home loan as per section 24(b) of the Act. Such a deduction is permitted on an accrual basis<\/a>, even if the interest is not actually paid. Interest includes pre-payment charges, brokerage, service fees, commission, etc. However, interest on unpaid interest or penalty will not be allowed to be deducted.<\/p>\n\n\n\n

        The maximum amount of deduction available is as follows:-<\/p>\n\n\n\n