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Can You Claim Both HRA & Deduction on Home Loan Interest?

By CA Mohammed S Chokhawala

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Updated on: May 13th, 2025

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3 min read

Yes, it’s possible to claim both HRA exemption and home loan deductions—provided certain conditions are met. For instance, you might be living in a rented home in one city for work while repaying a home loan on a property in another city. However, the claims must be genuine and supported by documentation.

In this article, we will explore the eligibility criteria and how you can make the most of these deductions.

What is HRA?

HRA or House Rent allowance under section 10(13A) is a percentage of an employee’s basic salary that is provided to cover the rent paid by taxpayers for residential accommodation. However, the amount of HRA paid to employees depends on the location of residence and the salary package. Also, HRA is allowed as a deduction while filing the Income Tax return (ITR) under section 80C. Let's see how much HRA is permissible for deduction under Section 80C. The value of HRA that is used as a deduction is the minimum of the three cases below:

  • Actual HRA received
  • 50% of the salary in metro cities like Delhi, Mumbai, Kolkata and Chennai and 40% of the salary in non-metro cities.
  • Actual rent paid - 10% of the total annual salary.

Here’s an example: Aryan lives in Gurgaon and pays a rent of Rs 10,000 per month; he gets an HRA of Rs 15,000. His basic salary is Rs 40,000. Aryan has taken a loan to buy a house in Bangalore, where his parents live. The interest he pays on the loan for his house is Rs 20,000 per month.

Aryan can claim HRA as follows – The amount of tax exemption from HRA will be a minimum of these three:

  • HRA received = Rs. 15,000
  • 40% of Basic since he lives in Gurgaon = Rs. 16,000
  • Rent paid – 10% of Basic = Rs.10,000 – Rs. 4,000 = Rs. 6,000

Therefore HRA exempt = Rs.6,000. Remaining HRA of Rs 15,000 – Rs 6,000 = Rs.9,000 will form part of his taxable income under Salaries on account of HRA.

Conditions for Claiming HRA

  • You must be a salaried individual receiving HRA as part of your salary.
  • You must have incurred rent expenses and occupied residential accommodation.
  • The benefit of HRA deduction is claimed only for the months rent is paid by a taxpayer. 

Home Loan Interest Deduction

According to the following sections of the Income Tax Act, 1961, taxpayers can deduct the principal payment and interest on a home loan.

  • Principal payment on home loan qualifies for deduction under section 24(B) of the Income Tax Act, 1961
  • Interest on home loan qualifies for deduction under section 80C of the Income Tax Act, 1961
  • You must have availed a home loan for a property in your own name or jointly with your spouse.

However, there are certain conditions an assessee needs to comply with to avail the deductions above.

  • An assessee has to be the legal owner of the property against which home loan has been availed.
  • The maximum deduction of Rs. 1.5 lakh can be availed against the principal repayment of the home loan. However, the taxpayer should not sell the property for 5 years to receive this benefit. In case of a sale of house property, a deduction will be added back in the year of sale.
  • A maximum deduction of Rs. 2 lakh can be claimed for interest payment on a home loan for a self-occupied property. However, the acquisition or construction of the property must be completed within five years after the financial year in which the home loan was borrowed.

Can we Claim HRA and Home Loan Interest together?

Yes, you can claim HRA tax exemption and home loan tax deduction as well if you meet certain conditions: 

Condition Can you claim HRA tax exemption and Home Loan Tax Deduction
You have availed a house on loan and you reside at a rented accommodation in another cityYes
You have availed a house on loan and you reside in the same city in a rented accommodation due to work or children’s schoolingYes
Provided the condition is genuine.
You have availed a home loan to buy an under construction apartment/house and you live on rent elsewhereYes
You can claim only the home loan interest deduction in case of under-construction property over five years in equal instalments starting from the year the construction is completed.
 
You rent the house you have availed with a home loan and you live in a rented accommodation elsewhereYes
You will have to show rental receipts from your own house to calculate income tax liability. 

If the house property is vacant or occupied by other family members,  it is still considered self-occupied property.

Note: Taxpayers paying taxes under the Old Tax Regime are eligible to claim the above exemptions/ deductions.

Read more about home loan-related tax benefits on our guide

Use the HRA calculator to determine HRA exempt from tax

The income from house property and claiming interest on home loan deduction will be allowed as follows: 

Gross Annual Value of the property is Nil (because his parents live in the house property) 
Less: Deduction on Interest on home loan = Rs 2,00,000 (limited to Rs.2,00,000 for self-occupied house) 
Net Loss under the head ‘Income from House Property’ = (-) Rs 2,00,000 which will be added to his taxable income.

Learn more about loss on house property due to home loan.

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Frequently Asked Questions

I have my house property in Chennai which is let out and I live in a different house in Chennai and pay rent for that. Can I Claim HRA exemption ?

No, you cannot claim an HRA exemption if you are living in a different house in the same city and own a house in the same city. Still, you can claim the benefit, only if you can substantiate with a valid reason for your stay, one of the reasons could be that the place of work is far from the house you own, it is necessary to stay in a rented house to ease the commutation.

Can you claim both the HRA tax benefit and Home Loan tax deductions if you are staying in a house bought on loan and you work in the same city?

You can claim HRA if you receive it as a part of your compensation. However, you need to reside in a rented accommodation to claim HRA. As you are staying at the house, you have availed on a home loan, and you work in the same city, you cannot claim HRA tax benefit. However, you can claim the income tax deduction on the home loan for principal and interest payments as you have taken ownership of the property.

You have a house in the same city, but that house is being resided by your husband’s parents. You are residing at another house on rent. Can you get the HRA tax benefit and home loan tax deductions?

You are a salaried employee who receives HRA as part of your compensation, and you reside at a rented accommodation in the same city where you work. Moreover, you have availed of a home loan to buy a ready to move house in the same city, and your in-laws reside in this house. You can claim both the HRA tax benefit and home loan tax deductions.  

About the Author
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CA Mohammed S Chokhawala

Content Writer
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I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more

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