I live in Gurgaon and pay a rent of Rs 30,000 per month. I get an HRA of Rs 25,000 and my basic salary is Rs 1,00,000. I have also bought a house in Bangalore as my parents live there. I took a home loan to buy the property and am paying interest on the same. Can I claim both HRA and interest rate deduction on home loan to reduce my tax burden?
— Nandita Choudhary
By Sujit Bangar, Founder Taxbuddy
Many times house rent allowance is part of CTC. HRA per say is not tax free unless you are actually paying rent for your place of residence. Therefore, deduction for HRA can be claimed by providing your rent receipts to your employer.
Home loan gives us major two tax benefits. EMI of home loan has two components: principle and interest. Principle is deductible as part of 80C bracket of Rs 150k. And Interest is deductible upto Rs 2 lakh, separately.
There may be situation that you are living in a rented accommodation and getting HRA. At the same time, you may have a flat purchased on home loan for which you might be paying EMI.
We can claim deduction for HRA and deduction for principle and interest from home loan EMI if we have purchased home on loan but living in rented accommodation. As per law, it doesn’t matter whether your purchased property is in same town or in different.
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