Many employees claim income tax deduction either on HRA or on repayment of home loan. There are few people who know that they can claim both these deductions together. If you are eligible to claim simultaneous tax deduction on HRA or home loan repayment then you should do so because what is the harm in getting some tax benefits on your hard earned money.
Tax benefits related to House Rent Allowance (HRA) and HRA
Play There is a component received by the salaried taxpayers to bear the payment of rent. It is allowed as exemption from taxable salary under section 10(13A) income tax act, 1961 (Act) on the satisfaction of a number of conditions.
This is the easiest way to claim both HRA and home loan deduction at the same time, says Amit Gupta, MD, SAG Infotech. First, you must meet the requirements for HRA, which includes being employed and receiving HRA in the form of salary deduction. One person can be exempted House rent Allowance (HRA) as per section 10(13A) of the Income-tax Act, 1961 (‘Income-tax Act’), if two conditions are satisfied, namely that the expenditure for payment of rent for the residential accommodation is actually incurred and that the residential accommodation is captured.
Anshu Agarwal, Finance Head (India), Branch International, says that the Income Tax Department allows you to claim both if you can prove that you cannot live in your house. “Your home is not in the same city you are currently working in. If you are working in the same city then it is difficult to travel from your own home to your workplace or children’s school is far away and traveling Every day is a challenge. You have given your house on rent to someone else, so you have to declare it as your income,” he said.
“A taxpayer residing in the same city where he has purchased his house through home loan can also claim both HRA and home loan tax benefit if the borrower has to pay rent due to distance, size or any other valid reason. Have to stay at home. That is acceptable to the Income Tax Department of India,” says Sudhakar Sethuraman, partner, Deloitte India.
Archit Gupta, Founder & 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 will be entitled to all home loan benefits and HRA exemption claims.
2) Owns a house in a city but lives on rent in the same city
The taxpayer owns a house property in a city but lives on rent in the same city for reasons related to his employment, such as long commute to work. In such cases, the taxpayer is eligible to claim HRA and home loan benefits if he can prove that he had genuine reasons for doing so.
3) Renting out your house and living in the same city on rent
When the taxpayer gives his house on rent and resides elsewhere for reasons like proximity to workplace, children’s school or any other genuine reasons. In this case, a deduction of up to Rs. 1,50,000 u/s 80C will not be available for repayment of home loan principal. The taxpayer can claim all other interest-related deductions and HRA exemption.
4) The house is under construction and is rented elsewhere
The taxpayer has repaid the loan for his house, which is under construction, and he lives in a rented house elsewhere in the same city. In such a case, the taxpayer can claim HRA exemption and all other home loan related deductions except interest under section 24(b). He can claim this deduction on the interest paid after the construction is completed in equal installments over the next five years.