Can You Claim Both HRA And Home Loan For Tax Exemption?

Can You Claim Both HRA And Home Loan For Tax Exemption?

Yes, you can claim tax exemption on both house rent allowance (HRA) and repayment of housing loan. In case you are living in a rented house and paying home loan on another house – even if both the houses are located in the same city – you can claim tax benefit.

Salaried individuals who live in a rental accommodation can claim HRA to lower their taxes. It is partially exempted. However, if an individual do not live in a rented accommodation, then the HRA is fully taxable.

The deduction on HRA is the lowest of the following under Section 10(13A) of the Income Tax Act:

a) Actual HRA Received

b) Actual Rent paid reduced by 10% of Salary

c) 50% of basic salary in case where taxpayer is residing in a metro city.

d) 40% of basic salary in case where taxpayer is residing in a non-metro city.

On the other hand, if you are paying a home loan you can also claim tax benefits on amount of principal and interest payments. Principal repayment, under Section 80C of the Income Tax Act, is exempted up to Rs. 1,50,000. And on interest repayment, exemption can be claimed up to Rs. 2,00,000, under Section 24.

Illustration 1:

Suppose Mr. Aditya lives in New Delhi and earns a basic salary of Rs. 40,000 per month. The HRA received by him is Rs. 18,000 and actual rent paid is Rs 12,000. How much exemption can he claim?

Solution: Let us understand the factors affecting HRA calculation.

a) Actual HRA received is (Rs 18,000 x 12) = Rs 2,16,000

b) Actual rent paid (Rs 12,000 x 12) – 10% of salary [(Rs 40,000 x 12) x 10%] = Rs 96,000

c) 50% of basic salary i.e. [(Rs 40,000 x 12) x 50%] = Rs 2,40,000

Therefore, Rs 96,000 is the least among the above obtained figures so Mr. Aditya can get Rs 96,000 exempt.

Illustration 2:

You are working in a city where you are living in a rented accommodation and you bought a house in your hometown.

Samarth works in Noida, but his wife and children live in Jaipur. He recently bought a house in Jaipur on a loan while he lives in a rented house.

Samarth can claim: HRA for rent he pays for the house in Noida, deduction of interest on home loan up to Rs.2,00,000 u/s 24b and principal repayment deduction under section 80C.

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