Can we claim HRA and interest on housing loan together?

Can we claim HRA and interest on housing loan together?

Yes, it is possible to claim both House Rent Allowance (HRA) and the interest on a housing loan simultaneously, provided certain conditions are met. These benefits can greatly reduce your tax liability and increase your disposable income. Let’s delve into the details and explore some related frequently asked questions.

1. What is HRA?

HRA or House Rent Allowance is a component of the salary given by employers to employees to meet their accommodation expenses.

2. Who is eligible to claim HRA?

Any salaried individual who lives in a rented house and receives HRA as a part of their salary can claim HRA benefits.

3. Are there any specific conditions to claim HRA benefits?

Yes, there are certain conditions that you need to fulfill to claim HRA benefits, such as actually paying rent, having a rent agreement, and providing the landlord’s PAN details if the rent exceeds a certain threshold.

4. What are the conditions to claim tax benefits on a housing loan?

To claim tax benefits on a housing loan, you must be the owner or co-owner of the property. Additionally, the property must not be self-occupied and should be let out/considered deemed to be let.

5. How much HRA can one claim?

The amount of HRA that can be claimed varies depending on factors like the employee’s salary, actual rent paid, and the city in which they reside. It is the lowest among the following: actual HRA received, 50% of the salary (for metros), or 40% of the salary (for non-metros).

6. How much tax benefit is available on home loan interest?

Under section 24(b) of the Income Tax Act, taxpayers can claim a deduction of up to ₹2 lakhs per year on the interest paid on a housing loan.

7. Can a person claiming HRA still avail tax benefits on a housing loan?

Yes, an individual can claim both HRA and tax benefits on the interest paid on a housing loan simultaneously.

8. Can the principal component of a housing loan be claimed for tax benefits?

Yes, the principal component of a housing loan can be claimed under section 80C of the Income Tax Act, subject to a maximum limit of ₹1.5 lakhs.

9. Can one claim HRA for a rented house if they own another house in a different city?

Yes, an individual can claim HRA for a rented house in one city, even if they own another house in a different city or are paying EMIs on a home loan.

10. Are there any additional conditions to claim HRA and housing loan benefits together?

No, as long as you meet the individual conditions for both HRA and housing loan tax benefits, you can claim them simultaneously.

11. Do I need to submit any documents to claim these benefits?

Yes, you need to provide rent receipts, rent agreement, PAN details of the landlord (if the rent exceeds a certain threshold), and loan statements while filing your tax returns.

12. Can I claim these benefits for a house that is under construction?

You can claim the housing loan interest deduction only after the construction is completed and you acquire possession of the property. HRA benefits can be claimed for a rented house during the construction period.

In conclusion, it is indeed possible to claim both HRA and interest on a housing loan together. By maximizing these tax benefits, individuals can significantly reduce their tax liability and make the most of their disposable income. It is important to familiarize yourself with the eligibility criteria and keep the necessary documents in order to avail of these benefits while filing your tax returns.

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