I get lots of inquiries about regardless of whether one can claim the tax rewards for House Rent Allowance (HRA) and dwelling loan each at the exact same time. The circumstances for claiming HRA are distinctive and these for claiming dwelling loan rewards are distinctive and are mutually exclusive.
Let us talk about the circumstances in detail.
Conditions for claiming HRA
HRA advantage is out there only to a salaried individual if particular circumstances are happy. The very first situation is that you are finding HRA as component of your salary. The second situation to be happy is that you should really be paying rent for the accommodation occupied by you, and the third situation to be fulfilled is that the rent becoming paid should really not be for the accommodation owned by you.
As the advantage of HRA is out there for the accommodation occupied by you only, you can not claim this advantage in case you are paying rent for an accommodation occupied by your totally dependent parents staying separately. Since receipt of HRA is a precondition, every single salaried can not claim the advantage of HRA.
As regards payment of rent for accommodations totally owned by you, you need to be asking yourself how can it be feasible. Yes, this is feasible in case you have leased out your house to your employer and the exact same house is let out to you by your employer. This is carried out to save taxes as the employee can avail tax advantage in respect of let out house in the type of 30% common deduction against the rent received as properly as interest paid for funds borrowed for such house. Likewise, in situations of jointly-owned residential homes, you can not spend rent to the other co-owner and claim the advantage of HRA. So, as discussed, regardless of whether the house is totally owned or partly owned by you, you will not be capable to claim the tax rewards if you spend rent for such house.
The circumstances for claiming the tax rewards for dwelling loan
Tax rewards for dwelling loans are out there for interest payment as properly as for repayment of the principal quantity. The advantage for principal repayment is out there below Section 80C inside the all round limit of Rs 1.50 lakh every single year. This advantage can only be availed for a residential house and only if the loan is availed from particular institutions.
For interest on dwelling loans the tax advantage is out there below Section 24(b). For a maximum of two self-occupied properties taken with each other, you can claim upto Rs 2 lakh in a year towards interest. In case you have more than two property properties as self-occupied you have to chose any two as self-occupied and the balance are treated as if they are let out and market place rent for such properties has to be supplied for tax. For a let out house or deemed to have been let out house, technically, you can claim advantage for complete interest paid but will only be capable to set off loss below the head “Income from House Property” upto Rs 2 lakh against other earnings throughout the exact same year. The unabsorbed loss is permitted to be carried forward for eight years for set off against earnings from property house.
In order to avail the tax rewards for dwelling loan regardless of whether below Section 80C for principal repayment or interest below Section 24 (b) one vital situation to be happy is that the property should really be total and the possession taken. So in case of below building properties you will not be capable to claim these rewards till the building is completed and possession taken. Both the rewards will be out there if you are owner as properly as co-borrower of the funds borrowed. The rewards shall be out there to the extent of your share in the dwelling loan serviced by you and not on the basis of your share in the house.
You can also claim interest upto Rs 1.50 lakh below Section 80 EEA for topic to satisfaction of particular circumstances for purchasing an economical property offered your dwelling loan has been sanctioned among 1st April 2019 and 31st March 2022. This advantage can even be claimed for an below-building house.
Simultaneous claim of HRA as properly as dwelling loan
The legal provisions in respect of HRA are contained in Section 10(13A) of the Income Tax Act and rule 2A of Income Tax Rules. These provisions do not provide that HRA advantage can not be claimed if you personal any property. Even for the property purchased with dwelling loan and situated in the exact same city exactly where you are working, occupied by your parents, you can nevertheless claim HRA rewards offered you remain in yet another property and essentially spend rent for that property when claiming the rewards for dwelling loans. Even for the property in city other than exactly where you are working and paying rent, the dwelling loan rewards can be claimed even if you reserve the exact same property for your occupation. It may perhaps also come about that you have let out the property which you personal and are staying in a rented property. In such a circumstance also you can claim each the rewards throughout the exact same year.
So, as extended as you satisfy the circumstances for claiming HRA for the rented property and circumstances for claiming rewards for the dwelling loan for the property owned by you independently, there is no restrictions on your eligibility to claim each at the exact same time. Please note that in case you are claiming the HRA advantage but not staying in that accommodation, the Income Tax Department can take penal action against you for delivering inaccurate info in your ITR. So, this twin advantage can and should really only be claimed in genuine situations and not for tax evasion goal.
(The writer is is a tax and investment specialist, and can be reached at [email protected])