Claim Tax Benefits on HRA & Home Loan Together – H&R Block

Can We Claim Tax Benefits on HRA & Home Loan Together?

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Can We Claim Tax Benefits on HRA & Home Loan Together?

With real estate developers doling out attractive schemes, home buyers aren’t worried about the equated monthly installment burden alone. What has been disturbing them is the loss of the house rent allowance benefit that they had been claiming so far.

Since the possession of these dream homes is far away, they have to bear the brunt of the stiff rents too. But if they are paying rent as well as servicing a loan, shouldn’t both the HRA and home loan benefits be allowed?

Yes, both the benefits can be claimed at the same time. The loss of the HRA benefit assumed by these borrowers is merely a myth. The start of a home loan doesn’t mark the end of the HRA benefit.

If you are paying rent for a house that you do not own then you can claim the HRA benefit as per the Section 10 (13A) of the Income Tax Act permits one to claim the HRA benefit if a person is paying rent for a house not owned by him.

This rule isn’t related to the loss from house property of upto Rs 1.5 lakh as interest that one can claim under section 24 (b). The window of deducting the principal amount repaid toward the home loan, under section 80 C remains open for those claiming HRA benefit too.

However, to avoid tax evasion specific restrictions have been laid out.

Consider Ravi, who is staying in the flat that he purchased on loan. He cannot claim HRA simply because he isn’t paying rent. But if Ravi purchases a house, whose possession is three years hence and as a result stays on rent then he can claim both the HRA and the home loan benefits.

He can claim both HRA and home loan deduction if he has purchased a flat in Bangalore using home loan, and is staying in a rented accommodation due to his occupation.

There are limitations on the HRA tax benefit too. It can be claimed subject to a minimum of:

  1. The actual HRA that you get
  2. (Actual rent paid) – (10% of your salary i.e Basic Salary + Dearness Allowance)
  3. 50% of the salary if rented house is in the four metros. In other cases 40% of the salary.

Any sum of HRA received over and above this would be added to the taxpayer’s income and taxed as per his bracket.

Remember that if the house is still at construction stage, one can claim only the principal amount of the home loan. The interest paid under the home loan can be claimed in five equal installments upon completion of the house.

If you have purchased two house properties then irrespective of whether you have rented out the second house or not, a notional (or actual) rental income is added to your earnings. You will have to shell out tax on this income, even if you aren’t earning the rent. But that is a small price to pay for the huge saving made through claiming both HRA and home loan tax benefits.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for E filing their Income Tax Returns Online.

 Visit hrblock.in for more information or to find your nearest office to find assistance to file taxes.

HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

3 Comments

  1. Anupam Bhandari says:

    Hi,
    Please see the below details and help me out.
    Home loan taken on August 2015, In December-2015 I got the possesion of my new house.
    Earlier I was living on rent, now moved to my new house in Jan 2016
    Can I claim tax benefit on: 1. HRA for period April-2015 to November-2015 (8 Months) 2. Sum of Principal Amount from the EMI which I will pay from December-2015 to March-2016 (4 Months)
    3. Sum of Interest Amount from the EMI which I will pay from April-2015 to March-2016 (12 months),

  2. Biswajit says:

    Hi,
    I have taken home loan in Nov 2014 and paying EMI since Jan 2015. I registered the flat last month. I have not occupied it yet. I am currently living in a rented house. In the company prepared Form 16, the rent component is present. Can I also claim the home loan interest paid so far in this Fy 2015-16 tax returns?
    Biswajit

  3. M P Jain says:

    R’sir,

    My Query is related HRA HOME LOAN Intt.+pricipal paid amt benefits in income tax 2017-18 and HRA paid amt benifits also, please clarity my query :

    Home Loam Paid in Mumbai a year : 4,08,000 Rs. ( Interest Rs. 1,22,000 + Principal Rs. 2,86,000)

    HRA paid at Rajasthan – Bhilwara due to my Mother (old-age) + family also in rented house paid yearly 2,40,000/-

    My service at Mumbai and yearly package : Rs. 9,50,0000 in this case what income Tax rule get the benefits…

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