Simultaneous claim of HRA exemption & deduction on Interest on Home Loan

By | June 22, 2015

Being salaried employee it’s very hard to save the taxes. House Rent Allowances (HRA) and the interest on home loan are two important provisions of income tax act for the salaried class of Assessee. Section 10(13A) of the income tax deals with HRA & section 24(b) deals interest on borrowed capital for the purpose of acquiring or constructing house property.

HRA means house rent allowances i.e. rent paid for occupying residential accommodation. Section 10(13A) allows assess to claim the expenditure incurred on rent on residential accommodation. As per section 10(13A) least of following can be claimed as exemption

1) 40% of basic salary (50% for Metropolitan City).

2) HRA actually received for the period by the employee.

3) Rent paid less 10% of basic salary.

HRA can be claimed by declaring and submitting the necessary proofs of rent paid to your employer as and when asked for. Also following two conditions must be satisfied;

(a) residential accommodation occupied by the assessee is not owned by him; and

(b) the assessee has actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him

Deduction under section 24(b);

An assessee can claim deduction of Interest on Housing loan taken to acquire, construct, repair, renewed or reconstruct a house property u/s 24(b) of the Income Tax Act. The deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence.

The quantum of deduction allowed as per table below:

Purpose of borrowing capital Date of borrowing capital Date of borrowing Capital Maximum Deduction AllowableRs.
Repair or renewal or reconstruction of the house Any time 30,000/-
Acquisition or construction of the house Before 01.04.1999 30,000/-
Acquisition or construction of the house On or after 01.04.1999 2,00,000/-*

*As amended by finance act 2014. Before that the limit was Rs. 1,50,000/-.

Can assess being salaried person claim both HRA & Interest on home loan?

Yes. Assessee being owner of house property and having interest on the borrowed capital can claim HRA & interest on loan together. Assessee owner of house property by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him. Further, ‘at any other place’ mentioned in section 23(2)(b) includes any other place in the same city.

In above scenario one can claim the interest on home loan and HRA together.

2 thoughts on “Simultaneous claim of HRA exemption & deduction on Interest on Home Loan

  1. serazul saleqeen

    In current year I hv leave on rent house till now & moving to own house which is purchased by me this month only. so can I claim for HRA & interest on home loan for this financial year.

    Reply
    1. TaxGuru Post author

      Yes you can claim the HRA till the possession date and thereafter interest on your home loan. Remember the interest portion you claim 100% there is no need to split the interest as pre-possession and post possession.

      Reply

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