Can You Claim HRA and Home Loan Tax Benefits Together?

Can You Claim HRA and Home Loan Tax Benefits Together?

Many salaried individuals often ask, “Can I claim HRA and home loan” benefits at the same time? This blog explains how you can legally claim House Rent Allowance (HRA) for rented accommodation while also availing tax deductions on home loan principal and interest payments. By understanding eligibility criteria, common scenarios, and required documents, you can maximize tax savings and plan your finances effectively while staying fully compliant with income tax regulations.

What is House Rent Allowance (HRA)?

House Rent Allowance (HRA) is a component of a salaried employee’s salary that helps cover rental expenses. It is a tax-exempt allowance under Section 10(13A) of the Income Tax Act, subject to certain conditions. The purpose of HRA is to provide financial relief for individuals who live in rented accommodation while working in a particular location.

Factors to consider when claiming HRA:

• It is available only to salaried employees receiving HRA as part of their salary package.
• The exemption amount depends on factors like basic salary, dearness allowance, actual rent paid and the city of residence.
• The exemption is calculated as the lowest of actual HRA received, rent paid minus 10% of salary and 50% of salary if living in a metro city, or 40% if in a non-metro city.
• You must be paying rent and have proof of payment to claim HRA benefits.

Understanding Home Loan Tax Benefits in India

Owning a home financed through a loan offers significant tax advantages under the Indian Income Tax Act. These are primarily available under Section 24(b) for interest paid and Section 80C for principal repayment.

Also Read: Home Loans: All you need to know

Home Loan tax benefits include:

• Section 24(b): Deduction of up to ₹2 lakh per financial year on interest paid for a self-occupied property. If the property is let out, the entire interest amount can be claimed without limit.
• Section 80C: Deduction of up to ₹1.5 lakh per financial year on the principal repayment amount. This limit is combined with other eligible investments like PPF, ELSS and life insurance premiums.
• The property must be completed within five years from the end of the financial year in which the loan was taken, to claim the full interest deduction.
• Stamp duty and registration charges can also be claimed under Section 80C in the year they are paid.

These deductions help reduce taxable income and lower the overall tax liability.

Can You Claim HRA and Home Loan Tax Benefits Together?

Yes, it is possible to claim both HRA and Home Loan tax benefits together, provided specific conditions are met.

Possible scenarios include:

Claiming HRA and Home Loan Benefits Together

It is possible to claim both HRA and home loan benefits, but eligibility depends on your living situation and proper documentation. Below are common scenarios:

Scenario 1: Living in rented accommodation while owning a home in a different city

• HRA Deduction: You can claim HRA for the rent paid on your rented property.
• Home Loan Interest Deduction: You can simultaneously claim deductions on the interest paid for your home loan on the owned property in another city under Section 24(b).

Scenario 2: Living in rented accommodation in the same city as your owned property

• HRA Deduction: Allowed if there are valid reasons, such as your workplace being far from your owned property, making daily commuting impractical. Proper documentation and justification are required.
• Home Loan Interest Deduction: You can still claim interest deduction on your home loan, provided the home is not considered self-occupied solely for claiming tax benefits.

Understanding these scenarios clarifies the legal standpoint and ensures compliance when asking, “can we claim HRA and home loan in same city” or “can HRA and home loan be claimed together.” Always maintain proper documentation for both rented and owned properties to avoid issues during tax assessment.

Eligibility Criteria to Claim Both Benefits Simultaneously

Eligibility Criteria for Claiming HRA and Home Loan Benefits

To claim both HRA and home loan benefits, certain conditions must be met. You must be paying actual rent for your accommodation, supported by rent receipts and agreements. The home loan should be in your name, and you should be the owner or co-owner of the property. You cannot claim HRA and home loan benefits on the same property unless there are valid reasons, such as workplace distance, under-construction property, or rented-out property. Maintaining proper documentation for both claims is essential in case of income tax scrutiny.

Also Read: Home Loan Benefits Vs. HRA tax benefits: Which is better?

How to Calculate HRA and Home Loan Tax Benefits Together

When claiming both benefits, each is calculated separately as per respective provisions.

Example:
Ravi works in Delhi and lives in a rented apartment paying ₹20,000 per month. He owns a house in Pune with an outstanding Home Loan.

HRA Calculation:

• Basic salary: ₹50,000 per month
• Actual HRA received: ₹25,000 per month
• Rent paid minus 10% of salary: ₹20,000 – ₹5,000 = ₹15,000
• 50% of salary (metro city): ₹25,000
• HRA exemption: Minimum of ₹25,000, ₹15,000, ₹25,000 = ₹15,000 per month, i.e., ₹1,80,000 annually.

Home Loan Deduction:

• Interest paid: ₹2,40,000 per year → Claim ₹2,00,000 under Section 24(b) (self-occupied limit).
• Principal repaid: ₹1,00,000 per year → Claim under Section 80C.

Total annual deduction: ₹1,80,000 (HRA) + ₹2,00,000 (interest) + ₹1,00,000 (principal) = ₹4,80,000.

Documentation Required for Claiming Both HRA and Home Loan Tax Benefits

To successfully claim HRA and home loan benefits, you must maintain proper documentation. Here’s a clear separation of documents for each claim:

1. Documents for HRA Claim:

• Rent receipts for the relevant period
• Rent agreement with the landlord
• Employer’s HRA declaration form

2. Documents for Home Loan Interest Claim:

• Home Loan sanction letter from the bank or lender
• Annual Home Loan interest certificate or provisional home loan certificate
• Possession or completion certificate for the property
• Proof of ownership (sale deed or allotment letter)

Maintaining these documents ensures compliance and smooth processing when claiming HRA and home loan deductions simultaneously. It also helps answer the common question, “Can I claim both HRA and home loan benefits?”

Common Misconceptions About Claiming HRA and Home Loan Together

• Myth: You cannot claim HRA if you own a house.
  Fact: You can, if you live in rented accommodation for valid reasons.
• Myth: Owning a house in the same city automatically disqualifies HRA claims.
  Fact: Not true, provided you can justify why you are not living in your own house.
• Myth: You cannot claim Home Loan benefits if the property is rented out.
  Fact: You can claim full interest deduction under Section 24(b) for let-out property.
• Myth: Both claims will be rejected by the income tax department.
  Fact: If you meet conditions and maintain documents, both can be claimed.

Tax Planning Tips to Maximise HRA and Home Loan Benefits Together

• Keep proper and updated records of rent receipts and agreements.
• Pay rent through traceable modes like bank transfers.
• Choose the right tax regime to maximise deductions.
• Consult a qualified tax adviser for complex situations.
• Ensure that all Home Loan and property documents are in order.
• Plan relocation or moves between cities carefully to maintain eligibility for HRA claims.
• Use accurate tax filing practices to avoid rejections or notices.
• Maintain a clear distinction between rented property and owned property to prevent confusion during claims.
• Track prepayments and interest payments for correct calculation of deductions.
• Reconcile employer-provided HRA with actual rent paid for accurate claims.
• Retain supporting documents for at least 5–6 years in case of income tax scrutiny.
• Stay updated on changes in tax rules and deductions related to HRA and home loans.

Apply now for a Home Loan.

Final Thought

Claiming HRA and home loan benefits together is a legal and effective way to maximize your tax savings, provided you meet the eligibility criteria and maintain proper documentation. Understanding common scenarios, such as living in rented accommodation while owning property in the same or different city, ensures compliance and smooth processing of deductions. Keep rent receipts, loan documents, and possession proofs updated, and consult a tax expert for complex situations.

FAQs

Q.1. Can I claim HRA if my property is under construction and I have a Home Loan?

A. Yes, you can claim HRA for your rented accommodation while your own property is under construction.

Q.2. Is it possible to claim HRA and Home Loan benefits if both properties are in the same city?

A. Yes, if there are genuine reasons such as distance from the workplace or better amenities near the rented home.

Q.3. What happens if I live with my parents but pay rent? Can I claim HRA along with Home Loan interest?

A. Yes, if there is a valid rental agreement, rent receipts and actual rent payment to parents.

Q.4. How should I maintain rent receipts and loan documents for tax filing?

A. Keep them organised year-wise, either in physical or digital form, for at least 6–7 years.

Q.5. Can non-salaried individuals claim HRA and Home Loan interest benefits together?

A. HRA is for salaried individuals only. However, non-salaried individuals can claim Home Loan deductions if eligible.

Q.6. Are there any risks of income tax department rejecting simultaneous claims? How to prepare for such scrutiny?

A. Rejections may happen if conditions are not met or documents are incomplete. Maintain complete, authentic records to avoid issues.

Q.7. Can HRA exemption be claimed without rent receipts?

A. No, HRA exemption cannot be claimed without rent receipts. Rent receipts are essential proof of payment, required by your employer and for income tax verification. Maintaining proper receipts ensures smooth processing and compliance.

Q.8. Is it mandatory to provide a landlord PAN to claim HRA?

A. Yes, if your annual rent exceeds ₹1 lakh, providing the landlord’s PAN is mandatory for HRA exemption. For rent below this threshold, PAN submission is not required.\

Q.9. What is the maximum amount I can claim under HRA and Home Loan tax benefits together?

A. The maximum HRA exemption depends on salary, rent paid, and city of residence, while home loan deductions under Sections 80C (principal) and 24(b) (interest) have separate limits. Both can be claimed together legally, but each deduction is subject to its respective statutory cap.

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