Double Saving: Claim both HRA and Home Loan deductions
If you are paying rent as well as repaying loans there is no reason why you cannot claim HRA (house rent allowance) and home loan tax benefits.
You may have been looking for tax-saving avenues, but there may be one right under your nose. Before you jump at the first tax-saving opportunity that knocks, we recommend a thorough check on your existing investments and expenses. Yes, expenses too can help you reduce tax!
One such expense is the rent that you have been handing over to your landlord. You may be already claiming a deduction of a part of the House Rent Allowance that you receive in the salary. But are you under the notion that the start of the home loan interest deduction marks an end to the HRA tax benefit? Then MSI tells you how your taxable income can be reduced further.
You can claim both the HRA as well as the home loan tax benefits, provided you fulfill certain conditions. If you are paying rent for a house that you do not own then you can claim the HRA benefit as per the Section 10 (13A) of the Income Tax Act. This is apart from the home loan benefit – both the interest deduction of up to Rs1.5 lakh under section 24 (B) and principal repayment under section 80C.
However, there are restrictions under which you cannot claim both the deductions. If you are staying in the house for which you have taken a home loan, then you cannot claim the HRA benefit. Simply put you aren’t paying any rent and how can you claim allowance for it. Here are the other situations and what can be claimed:
|Residing in house, for which repaying home loan||No (Since not paying rent)||Yes (interest + principal)|
|Stays on rent in Delhi and purchased home with loan in Mumbai||Yes||Yes (interest + principal)|
|Stays on rent as own house underconstruction||Yes||Yes. Principal only till project completion|
|Bought house on loan but staying on rent for proximity to office||Yes||Yes (interest + principal)|
|Rented your house and stayig on rent||Yes||Yes (Rental income taxed)|
|Repaying loan for home occupied by parents and staying on rent||Yes||Yes|
But when you are claiming HRA, there are restrictions on the amount claimed. You are entitled to a minimum of:
a. The actual HRA that you get
b. (Actual rent paid) – (10% of your salary i.e Basic Salary + Dearness Allowance)
50% of the salary if rented house is in the four metros. In other cases 40% of the salary.
c. The balance of the HRA would be added to your income and taxed.
Remember that if you have rented out your own flat and you too are staying on rent, then the rent that you receive would be added to you income. Even if the house owned by you is vacant a notional rental income is applicable for which you will have to shell out taxes.