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Homeowners, who are paying back their home loan and getting HRA as part of their salary, can avail both the house property-related tax benefits to lower their taxable income. There can be cases where you work in one city and live on rent, your family resides in another city, and you buy a home where your family is. A homeowner can claim:
Read more about home loan-related tax benefits on our guide
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 currently 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:
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.
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.
No, you cannot claim HRA exemption if you are living in a different house in the same city and have a Self Occupied House in the same city.
HRA – House Rent Allowance – Exemptions, Rules & Tax Deductions
5 things you must know about the most common allowance – HRA
