HRA & Deduction for Interest on Home Loan

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2009 I have a flat in Mumbai where I work. I have rented a house in Nagpur for my Family. Can I claim Deduction for HRA as well as Interest on borrowed loan for purchasing flat in Mumbai

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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23 December 2009 No,A perosn cannot claim both HRA & Housing interest

CA CHINTAN AJMERA

CA CHINTAN AJMERA (Expert)
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23 December 2009 In the given case you can claim housing interest only.

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Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2009 Clarification needed

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 Yes, you can claim both House Rent Allowance (HRA) and a deduction for the interest on a home loan under the Income Tax Act, 1961, even if you own a flat in Mumbai and have rented a house in Nagpur for your family. Here’s how you can claim both benefits:

### **1. Claiming HRA (House Rent Allowance):**

**Eligibility for HRA Claim:**
- **HRA Exemption:** You can claim HRA for the rent you are paying for the accommodation in Nagpur where your family is residing.
- **Conditions:**
- **Rent Paid:** You must be paying rent for the Nagpur house.
- **Rent Agreement:** Maintain a valid rent agreement and rent receipts.
- **HRA Calculation:** The HRA exemption is calculated based on:
- Actual HRA received,
- Rent paid minus 10% of your salary,
- Or 50% of your salary (since Mumbai and Nagpur are considered metro and non-metro cities, respectively).

### **2. Claiming Deduction for Interest on Home Loan:**

**Eligibility for Home Loan Interest Deduction:**
- **Interest on Home Loan:** You can claim a deduction for interest on the home loan under Section 24(b) of the Income Tax Act, 1961.
- **Conditions:**
- **Property in Mumbai:** Since your property is in Mumbai, and it is not used for your personal residence, you can treat it as a "deemed to be let out" property.
- **Interest Deduction:** You can claim a deduction of up to ₹2 lakh per financial year on the interest paid on the home loan if the property is deemed to be let out.
- **Principal Repayment:** Additionally, you can claim a deduction for principal repayment under Section 80C, subject to the overall limit of ₹1.5 lakh for all eligible investments under Section 80C.

### **Steps to Follow:**

1. **HRA Claim:**
- Ensure you are actually paying rent for the accommodation in Nagpur.
- Keep all relevant documents such as rent receipts and the rental agreement.
- Calculate the HRA exemption based on the formula provided under Section 10(13A).

2. **Interest on Home Loan:**
- Keep records of the home loan statements showing the interest paid.
- For the property in Mumbai, claim the interest deduction under Section 24(b) as a part of income from house property.
- Also, claim the principal repayment under Section 80C.

- **Interest on Home Loan:**
- **Interest Paid:** ₹2,50,000 annually
- **Deductible Amount:** ₹2,00,000 (since the maximum allowed deduction is ₹2,00,000 under Section 24(b))

### **Summary:**

- **HRA:** You can claim HRA for the rent paid for your Nagpur house, provided you meet the necessary conditions and have the required documentation.
- **Home Loan Interest Deduction:** You can claim a deduction for the interest on the home loan for the Mumbai property under Section 24(b) and principal repayment under Section 80C.

Make sure to maintain all supporting documents and adhere to the respective tax provisions. If needed, consulting a tax professional can provide personalized guidance and ensure compliance.