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Can you claim tax exemption on both HRA and home loan?

While filing an income tax return, one of the questions that arise in every tax payers mind is that if they can claim both House Rent Allowance (HRA) and home loan for tax exemption. 99acres attempts to clear this doubt.

In order to lower the taxable income, homeowners repaying their home loan, and claiming HRA as a part of their compensation, can avail both the property-related tax benefits. For instance, if you are living in a rented accommodation and have taken a home loan on another property, you can claim:

  • Exemption of HRA towards rent payment
  • Deduction on home loan interest under Section 24
  • Principal Repayment as per Section 80C
  • According to Nikhil Bhasin, Partner, Amit Singhania and Co., “A homebuyer can claim income tax exemption on both HRA and repayment of housing loan. Sometimes you work in one city and live on rent but your family resides in another city and you buy a home there. Hence, deduction is available both towards HRA and housing loan.” He further adds that both the tax benefits can also be claimed if the two properties (the one you have rented and the one you have purchased) are situated in the same city.

    However, in cases involving higher amounts, the Income Tax (IT) department closely observes the situation and may reject one of the claims by the taxpayer if insufficient explanations are given. 99acres takes a look at some of the cases where the IT department may not ask questions:

  • When the person may have left the rented accommodation and moved to their house or vice versa during the year
  • When the house owned by the person is smaller in size due to which he may have shifted to a bigger rented house
  • When the children of the person who has rented the house are studying in the same locality and it was not viable for him/her to shift his/her children to some other school during the year, restricting their move into the new purchased home
  • Contrary to this, the IT department in some cases may question the tax exemption claimed by the person on both HRA and home loan. Hence, it is advisable that the person should keep all the related documents such as lease deeds, possession letter, completion certificate, etc. and justification ready in case the IT department raises such a query.

    To understand the calculation of HRA,

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