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HRA And Home Loan – Can You Claim Tax Deduction On Both?

Adhil Shetty

With the tax saving season underway, as a salaried individual you should not miss any opportunity to reduce your tax liability. As a first step in tax planning, you should first ascertain the avenues that can help you in tax saving before you opt for a new investment. In case House Rent Allowance (HRA) is part of your salary, you can claim tax benefits to lower your taxable income. You can also claim tax benefits for the home loan you have availed. But can you claim tax benefits for both HRA and home loan?

As per the income tax laws, there is no restriction on claiming both the HRA and home loan deduction for tax benefits. You can avail both, but there are certain technicalities that you should be aware of. These points can come handy.

When You Can Claim HRA

If HRA is part of your salary component and you are paying rent, then as per Section 10 (13A) of the I-T Act, you can claim HRA, deductions will be the lowest of the following three:

HRA allowed by the employer

If the employee lives in a metro, then 50% of basic salary, else 40% of basic salary

Actual Rent Paid ‘Less’ 10% of basic salary (Including DA and eligible commission)

When Can You Avail Home Loan Benefits

In case you have taken a home loan, you can claim deduction for principal repayment for amount upto Rs 1.5 lakh under Section 80C and against interest paid on the home loan upto Rs. 2 lakh under Section 24 (b).

Claiming Deductions On Both HRA And Home Loan 

While claiming tax benefits on both, remember the following:

– If you live in a city on rent and have a flat of your own, acquired through home loan, in another city, you are eligible to claim tax benefit for both.

– If the property owned by you and the rented one are in the same city, you can still avail tax benefits on both home loan and HRA after furnishing a genuine reason to your employer for not living in your self-occupied home.

– In case the property you own has been rented out and you live in a rented accommodation, you will have to furnish the rental income and pay necessary taxes as per applicable slabs. You can also claim HRA as per the specified limit.

– You can also claim tax benefit for both HRA and home loan if you have taken a loan for house, which is under construction and you stay in a rented accommodation. In this case, you can avail home loan tax benefit only for interest paid.

As per the law, a taxpayer is expected to own more than one property. One can be can be claimed as self-occupied. However, when you are claiming both the HRA and home loan deduction benefit, ensure you have strong reasons for all your claims, be it living in a rented house while owning a house to avoid getting tax notices.

The writer is CEO,