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How to Claim Both HRA and Home Loan Interest Tax Deduction?

IndianMoney.com Research Team | Posted On Saturday, August 03,2019, 03:31 PM

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How to Claim Both HRA and Home Loan Interest Tax Deduction?

 

 

Are you living on rent and also repaying a home loan? You must be keen to know how to claim both HRA and the home loan interest tax deduction. You can claim tax benefits on both HRA and Home Loan Interest, if you meet a few conditions.

You get HRA as part of your salary. You may be repaying home loan and want to enjoy home loan tax benefits. Take a look at a popular case where, you work in one city and live there on rent. Your family lives in another city and you buy a house where your family resides.

You can:

  • Claim HRA from salary package towards rent payment.
  • Claim tax deduction on home loan principal repayment under Section 80C up to Rs 1.5 Lakhs a year.
  • Claim tax deduction on home loan interest repayment under Section 24 up to Rs 2 Lakhs a year.

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How to Claim Both HRA and Home Loan Interest Tax Deduction?

Claim both HRA and Home Loan Interest Tax Deduction

Yes, you can claim both HRA and Home Loan Interest Tax Deduction. To claim HRA deduction, you must pay rent. HRA and Home Rent fall under different sections of the Income Tax Act. HRA Exemption can be claimed under Section 10(13A) of the Income Tax Act. Claim tax benefit on home loan principal repayment under Section 80C and home loan interest repayment under Section 24B.

See Also: How to Claim HRA in Tax Return?

When Can You Claim Both HRA and Home Loan Interest Benefits?

  1. You Have a House in Another City: Let’s understand this with an example. Ramesh works in a Company in Mumbai and stays in a rented apartment. He has bought an apartment in Bengaluru for which he has availed a home loan. Now, Ramesh cannot stay in his house in Bengaluru as he is working in Mumbai. He can claim both HRA from salary (assuming this is part of the package) and Home Loan Principal and Interest tax benefits.
  2. When Your House is Under Construction: Let’s say you have availed a home loan to construct your house. You can claim a HRA deduction on salary. After your house is constructed, you can claim tax benefits on home loan interest paid till the date of house completion.
  3. You have a House But Cannot Move in: You may own a house, but it’s far away from the workplace. You would take a rented house/apartment near the workplace. You can claim both HRA and home loan tax benefits. (House and place of work must be separated by at least 35 Kms to get this benefit).
  4. You Reside in a Rented House and Rent Your Own House: You buy an apartment/house availing a home loan. You then stay in a rented apartment, and give your house on rent. Then, you may claim the HRA deduction on rent paid and also the interest paid on home loan for the house you have rented out. You set off home loan interest against rental income.

See Also: HRA Tax Calculation 

Documents to Claim Tax Deduction on Home Loan

  • Collect the provisional interest certificate from the bank, which shows home loan principal and interest break-up. The certificate has the home loan sanction date and PAN.
  • Possession or Sale Deed Copy. 
  • Lease Deed copy for let out property.
  • For joint home loan, the declaration of ownership proportion must be furnished.

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