Can you claim tax benefit on both home loan and HRA?

A taxpayer can claim tax exemption on house rent allowance (HRA) if he/she lives in rented accommodation. Similarly, the tax benefit can also be claimed by a salaried individual on home loan repayment. But, what if an individual who has taken a home loan is also paying rent for a residential accommodation? Can a taxpayer claim tax exemption on both HRA and home loan repayment?

Claiming HRA tax benefit
Individuals who live in rented houses can claim House Rent Allowance (HRA), either partially or wholly. “House rent allowance can be claimed under section 10 (13A). One can claim HRA under three conditions. These three conditions are house rent actually paid, excess of rent paid over 10% of basic salary, 40% of salary if you are in non-metro and 50% of salary if you’re in a Metro city. These three are put together and the minimum of the three is subtracted from the HRA received. The rest of it is taxable. If in case a taxpayer is able to cover it entirely then the entire amount becomes exempt. An individual needs to be careful while paying rent as having proper rent received is important. The rent should be physically transferred from your account to the account of the recipient. Preferably there should be Rent Agreement as well,” explains Sharad Kohli, Founder & Chairman, KCC Group.

Claiming tax benefit on home loan
“Interest on the loan taken can be claimed under section 24B up to Rs 2,00,000. The principal repayment can be claimed within section 80C up to Rs 1,50,000. The principal amount is part of all the constituents of section 80 C where the total limit is 1,50,000. You can claim borrowed money interest from any of the financial institutions,” Kohli said.

“What very few people know is that if you have taken a personal loan for constructing or buying a house, say, you have taken a loan from one of your relatives and you are paying interest on that, you can still claim a tax benefit of Housing Loan. You can also claim a home loan interest benefit on a self-occupied property. You need to obtain a housing loan interest certificate at the end of the year, which should clearly reflect interest and principal paid separately,” he added.

Under what conditions can a salaried individual claim tax benefit on both HRA and home loan at the same time?

You can claim the benefit of both HRA and housing loan at the same time. However, you have to provide proof of residence of the rented house for which you are claiming HRA tax break. As long as the taxpayer is fulfilling the conditions of both HRA and home loan, he/she is eligible to get tax exemptions on both.

“Conditions can be either your own house is under construction or your parents are staying in there, or a tenant is staying in your home because of which you are compelled to stay in rented accommodation. If one of these situations is proved, then you can claim the double benefit,” Kohli added.