Sage-Tips

Can HRA and interest on housing loan be claimed simultaneously?

One can claim HRA exemption as well as the deduction for interest on a home loan if one owns a house but lives in a rented house. Both these tax deductions are allowed only if the house one owns and the house one lives in are at different locations and there is a genuine reason for not living in one’s own house.

What is HRA exemption in income tax?

HRA is a component of salary paid by big employers towards rent payment by the employee. HRA exemption is allowed least of the below : Actual HRA received by the employee. 40\% of salary for a non-metro city or 50\% of salary if the rented property is in metro cities like Mumbai, New Delhi, Kolkata, and Chennai.

How do I claim HRA exemption?

Once you know the HRA claim amount, use the right ITR form and file for your ITR by following these steps:

1. Enter your salary in ‘Salary as per provisions contained in section 17(1) ‘ in Form 16 – Part B.
2. Enter the HRA calculated above under ‘Allowances exempt u/s 10’ in the ITR 1 (select 10(13A) in the drop-down menu)

Can I claim both HRA and home loan interest tax exemption?

As both home loan interest tax exemption and HRA fall under different sections, assessees are allowed to claim both HRA and home loan benefits.

Can I claim HRA If I own a house in another city?

There may be case where you have rented a place where your spouse/parents stay (in a different city) while you own a house at the city of your employment and stay there. In this case you cannot claim HRA tax benefit as HRA is paid for staying on rent for purpose of employment. However you can easily claim home loan tax benefit.

What is the maximum amount HRA can be claimed for tax exemption?

The maximum HRA that can be claimed for tax exemption is minimum of Actual rent paid – 10\% of salary = Rs 12,000 – [10\% of (30,000 + 0)] = 12,000 – 3,000 = Rs 9,000 Rs 9,000 being the least of the three amounts will be the exemption from HRA. The balance HRA of Rs 6,000 (15,000-Rs 9,000) is taxable.

Can my wife claim HRA and interest on borrowed capital?

The answer is yes, she can. House Rent Allowance (HRA) is explained u/s 10 (13A) of the Income Tax Act while Interest on borrowed capital for acquisition or construction of house property is explained u/s 24 (b) of the Income Tax Act.