Yes, you can claim both HRA exemption and home loan deductions if conditions are met. Even if both the houses are in the same city , HRA and home loan interest can be claimed. However, ensure that you are not claiming home loan on self occupied property. You can claim interest on let out house property. Also, ensure that both claims are genuine, backed with valid rent receipts, loan documents, and proof of occupancy.
Key Highlights
- You can claim both HRA and home loan interest, provided they are for two different properties
- They can be claimed even if both the house properties are located in the same city.
- You cannot claim HRA and home loan interest on the same property.
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.
HRA is not fully taxable, and a certain portion can be claimed as an exemption. The amount of HRA exemption will be calculated as the least of the following:
Metro Cities (Delhi, Kolkata, Mumbai and Chennai) | Other Cities |
Actual HRA Received | Actual HRA Received |
50% of Salary | 40% of Salary |
Rent paid - 10% of Salary | Rent paid - 10% of Salary |
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 or deductions.
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.
The amount of HRA exemption available to Aryan 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 Head of Salaries.
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