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.
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:
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:
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.
According to the following sections of the Income Tax Act, 1961, taxpayers can deduct the principal payment and interest on a home loan.
However, there are certain conditions an assessee needs to comply with to avail the deductions above.
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. |
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.