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Can you claim HRA and tax benefits for home loans simultaneously?

Author: Balwant Jain/Wednesday, September 12, 2018/Categories: Tax, Expert View

Can you claim HRA and tax benefits for home loans simultaneously?

For long, there has been a persistent confusion about whether one can avail both tax benefits of HRA as well as home loan at the same time.

The benefit of HRA is available if you satisfy three conditions. First, you are paying rent for a residential house not owned by you. Second, you are in receipt of HRA from your employer and third the house is occupied by you and thus is situated at the place where you are working. So the benefit of HRA can only be claimed by a salaried receiving HRA and not by those who are self employed. 

Since tax benefit can be claimed for accommodation occupied by you only, rent paid for the premises occupied by your fully dependent parents at some place other than where you stay will not be eligible for HRA tax breaks.

In cases where you have let out your property to your employer and the employer in turn allots the same to you, charges for rent will not be eligible for HRA benefit. Moreover, in case the house is jointly owned by you and you pay rent to the other joint owner, you cannot claim the benefit of HRA.

Tax benefits of home loans:

For claiming tax benefits for home loan the first and foremost condition is that the house in respect of which the home loan is taken should be complete and possession is taken during the year. Moreover, you can claim these benefits if you are an owner of the house as well as borrower or co-borrower of the home loan and are in fact servicing the home loan. So unless all these conditions are satisfied cumulatively, you cannot claim the tax benefits of home loan.

Claiming HRA as well as home loan benefits

The law in respect of HRA tax benefit contained in Section 10(13A) read with rule 2A nowhere stipulates that tax benefit of HRA shall not be available if the taxpayer owns any house even in the same city. Even in case you own any house in the same city on which you have taken home loan and which is occupied by your parents, you can claim HRA benefits if you are in fact paying rent and staying in that another house.

The income tax laws allow you to own more than one house, but you can only have one house as self occupied and the other house/s if also self occupied shall be deemed as let out. So if you interpret this logically, the tax payer, in addition to occupying a rented house, can have one owned house as self occupied and claim the tax benefits of home loan for such house. However, if you are not staying at the place for which you are claiming the HRA benefits or have let out the house owned by you but not disclosed it in your ITR, the income tax department can take penal action against you for furnishing untrue information. Hence, unless you are actually paying rent for the house where you are staying and having your own house either vacant or used by your family members without rent, you can avail both the benefits simultaneously. 

The author is tax and investment expert and can be reached on jainbalwant@gmail.com

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Balwant Jain
Balwant Jain

Balwant Jain

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