Many people confuse that if you have the home loans then you are not eligible for the HRA deduction from the income. That is not the correct opinion, in many case people buy the house and for some reason they will stay in the rented property. In that case they are eligible for the HRA exemption. The exemption of HRA is covered under Section 10 (13A). The following conditions are needed to allow the HRA exemption: The rent must be actually paid by assessee. The rented property is not owned by the assessee. The section does not enforce any rules if the assessee owns any other property. So, that is irrelevant to the case. Principal portion of the home loans will not affect in any way to the HRA or interest payable. Home Loans and Interest Payment Here I will be writing about the various scenarios involved in interest paid on home loans. There may be scenarios where one person owns many properties with different city. This section will explain you with example of how to calculate the tax benefits on that scenario. If the person self occupied the property, then it is direct deduct from the income. For example a person paid Rs.120000 for interest on home loans. His total income is Rs.400000. Then his taxable income is Rs.400000-Rs.120000=Rs.280000. (Other tax deductions will be added). There is upper limit of Rs.150000 as interest payable if the property is self occupied. The limit is applicable for the person owns multiple home loans for more than one property, if the property is self occupied. If the property is rented out, then the annual value (income as rent) will be calculated for that property. The formula will be like this:Annual Value (Rental Income) – 30% as the standard deduction – Interest Payable on home loans = Income from house property. In the above scenario, income from house property can be negative when the interest payable is more that rent received. In such scenarios the loss will be deducted from the total income. For the rented property there is no limit on the interest payment. For example, the total rent received in particular year is Ra.100000. the same year interest paid on home loans is Rs.300000. Then Rs.200000 (300000-100000) can be deducted from the total income. This calculation is for the rented property. If the property is vacant, not rented out and also not self occupied. The you will have to calculate the rental value based on the market and location of the property. That notional vale will be used for the calculation. There is nothing in the section that affects the exemption of HRA at all. Also, there are no conditions that restrict the availability of deduction of interest based on the assessee’s stay in any other premises.