alexa
Indianmoney.com Missed Call Number
Home Articles Claiming Tax Exemption On Both Home Loan And HRA?

Claiming Tax Exemption On Both Home Loan And HRA?

IndianMoney.com Research Team | Updated On Thursday, September 06,2018, 02:40 PM

5.0 / 5 based on 1 User Reviews

Claiming Tax Exemption On Both Home Loan And HRA?

 

 

You are a software engineer, working for a highly reputed Private Company in Mumbai. You love your job and earn a good salary. You get HRA (House Rent Allowance), as part of your salary package. You stay in a rented apartment very close to your office. This helps you save time on travelling from your home to office. You have availed a home loan from a public sector bank and purchased an apartment in your home town of Delhi. Your wife and children stay in this apartment.

You’re confused…. It’s time to file your income tax returns. "Can you claim both HRA and home loan benefits?"

What is meant by HRA Tax Exemption?

You earn a basic salary of INR 40,000 a month. You get a HRA (House Rent Allowance) of INR 25,000 as part of your salary package. You are given this amount by your Company, towards staying/rental expenses. You pay a rent of INR 20,000 a month for your rented apartment in Mumbai.

The HRA (House Rent Allowance) given to you by your Company is subject to

Condition 1:

The actual rent you pay – 10 % * (Basic salary)

Condition 2:

50% of (Basic Salary) in case you reside in a Metro

And  40% of (Basic Salary) if you reside in any other city

Condition 3:

Actual HRA you receive from your employer.

You have to pay tax on the amount received from your employer, minus the amount which is the least among the above three conditions.

(A) You pay a rent of INR 20,000 on your apartment, out of which 10% of your basic pay of INR 40,000 is deducted.

INR 20,000 - INR 4,000 (10% of INR 40,000) = INR 16,000.

(B) 50% of your basic salary as you reside in a metro city.

50% of (INR 40,000) = INR 20,000

(C) Actual HRA you receive from your employer which is INR 25,000.

You have to pay tax on the amount received from your employer minus the amount which is the least among the above three conditions.

This is INR 25,000 (amount you receive from your employer as HRA) – INR 16,000 (amount which is the least among the above three conditions).

You have to pay a tax on INR 9,000.

SEE ALSO: All You Need To Know About Home Loan Down Payment And EMI

Your situation

You stay in a rented apartment in Mumbai. You have availed a home loan and purchased an apartment in Delhi.

You get HRA (House Rent Allowance), as part of your salary package. You also stay in a rented apartment in Mumbai. You are entitled to an HRA exemption. Your home for which you have availed a home loan is in Delhi. Your home is in a different city. You get an INR 1.5 Lakh tax deduction, under Section 80 C of the income tax act, on the principal component of your home loan. You get a tax deduction of INR 2 Lakhs under Section 24(b), on the interest you pay on your home loan. You are eligible for home loan benefits on the home loan you have availed. You can claim both HRA and home loan benefits as your rented apartment is in Mumbai and the home you have purchased on loan, is in a different city of Delhi.

Your colleague, who works in the same department, stays in a rented apartment in Mumbai. He has also availed a home loan and purchased an apartment. Just like you he gets HRA (House Rent Allowance), as part of your salary package. The one difference. Your friend has availed a home loan and purchased an apartment on the outskirts of Mumbai. Can he claim both HRA and home loan benefits?

Your friend has purchased an apartment on loan on the outskirts of Mumbai. He is entitled to home loan benefits, under Section 80 C and Section 24 (b) of the income tax act. Fine…You already know this, but a question still remains… Your friend gets HRA (House Rent Allowance) as part of his salary package. He also stays in a rented apartment in Mumbai. Is your friend entitled to HRA benefits as he is the owner of an apartment on the outskirts of Mumbai itself?

The surprising answer….Yes your friend can avail both HRA and home loan benefits, even though he stays in a rented apartment in Mumbai and has purchased a home on loan, in Mumbai itself. All he has to do is give a genuine reason. The apartment he has purchased o home loan on the Mumbai outskirts is too far from his workplace.

You have learnt something very important from this article. You can claim tax exemption on both HRA and home loan.

 

Did you find this article useful? You can Rate us
5.0 / 5 based on 1 User Reviews
Article Author

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

Subscribe to our Youtube Channel

 
Get the Best Financial Advice on Tax PlanningClick Here

Most Popular

Why one must never neglect estate planning

07 January 2014, Tuesday

Things to Know About Hybrid Mutual Funds

26 November 2013, Tuesday

What is Car Insurance? Why is it important?

21 October 2009, Wednesday

Latest Stories

Unsecured Loan

18 September 2018, Tuesday

MCLR vs Base Rate

18 September 2018, Tuesday

How To get Personal Loan Without Bank Statement?

18 September 2018, Tuesday

Best Travel Credit Cards 2018

17 September 2018, Monday

Should India Adopt Electric Vehicles?

17 September 2018, Monday

Popular Tags

GST
UK
 
Get the Best Financial Advice on Tax PlanningClick Here

Calculators

Get It now!