Can you claim both HRA & deduction on home loan interest?

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:

• HRA exemption towards rent payment
• Deduction on home loan interest as per Section 24
• Principal Repayment under Section 80C

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:

• 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.

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.

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 HRA exemption if you are living in a different house in the same city and have a Self Occupied House in the same city.

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.  

Can you claim HRA tax exemption and deduction on home loan interest as well?

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 city	Yes
You have availed a house on loan and you reside in the same city in a rented accommodation due to work or children’s schooling	Yes Provided the condition is genuine.
You have availed a home loan to buy an under construction apartment/house and you live on rent elsewhere	Yes 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 elsewhere	Yes You will have to show rental receipts from your own house to calculate income tax liability.

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Home Loan Tax Benefit