LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Tax benefit on hra and home loan -available or not? read mo

14 March 2013

TAX BENEFIT ON HRA AND HOME LOAN -AVAILABLE OR NOT? whether individual can get exemption of HRA under section 10(13A) of the Act?, based on the rent actually paid by them as well as the interest & Principal paid on the housing loan taken for construction of a property.

Reply
Follow
Share

15 Replies

Santosh Mishra (AM) (1135 Points)
Replied 14 March 2013

Prerequisite to claim interest exemption & principal deduction is that construction of the property should have been completed by the end of financial year in which loan was borrowed. So I assume here that construction would be completed by end of financial year. Otherwise no deduction/exemption is allowed in current year.

HRA Exemption: The person is getting HRA and paying house rent, hence, he can claim HRA exemption under sec 10(13A) of the act.

House loan principal payment: Yes, he can claim deduction for principal paid u/s 80C up to 100,000.

House loan interest:

1) If property is not in same city and person is not able to occupy it due to his job: It would be deemed as self-occupied property and person can claim Interest exemption up to 150,000.

2) If property is situated in same city but person has not occupied the property (as he is claiming HRA) : it would be deemed as let out property (if not let out actually) and notional income would be taken as Income from House property. In this case person would get standard deduction (30% of GAV) and there is no limit for house loan Interest exemption.

In short, a person can not claim HRA as well as HL benefits if both the houses are in same city because:

“Under Section 10(13A) of Act any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from Income-tax”

“Sec 24(b)(i) the deduction is allowed only in case of house property which is owned and in the occupation of the employee for his own residence”

Both the provision say that “property should be occupied by the assessee” and one person can not occupy two houses at the same time.

CA Suraj Lakhotia (IndigoLearn) (4898 Points)
Replied 15 March 2013

@ Santosh Mishra,

There is no section 24(b)(i) in the income tax act.

At point 2), you have mentioned that there is no limit to claim interest.

I could not understand the conclusion in which you said, HRA and Interest benefits cannot be taken if the houses are situated in same city.

_____________

Both HRA and HL benefits would be available to assessee, whether the property are situated in the same city or not.

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

Originally posted by : CA Suraj Lakhotia

@ Santosh Mishra,

There is no section 24(b)(i) in the income tax act.

I mean to refer CBDT CIRCULAR NO. 8/2012 [F.NO. 275/192/2012-IT(B)], DATED 5-10-2012, which says.

“Section 24(b) of the Act allows deduction from income from house property on interest on borrowed capital as under:-

“(i) the deduction is allowed only in case of house property which is owned and in the occupation of the employee for his own residence. However, if it is not actually occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.”

At point 2), you have mentioned that there is no limit to claim interest.

I could not understand the conclusion in which you said, HRA and Interest benefits cannot be taken if the houses are situated in same city.

( Yes, if person is not staying in the property for which loan has been taken and he is claiming HRA benefit for another house in which he is staying, the said property can not be said as “self occupied property” hence, house loan interest benefit can be taken as the property is let out (deemed let out) & there is no limit for interest payment.

_____________

Both HRA and HL benefits would be available to assessee, whether the property are situated in the same city or not.

(Why not, he can claim. But HL benefits can not be claimed as self occupied property, how one person can self-occupy two houses at one point of time. )

CA Suraj Lakhotia (IndigoLearn) (4898 Points)
Replied 15 March 2013

It would be deemed let out and assessee can claim benefit of HL.

The querist might be confused when you wrote - "In short, a person can not claim HRA as well as HL benefits if both the houses are in same city because -"

Thanks for clarifying.

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

You may be right. But I clearly quoted in my point 2 that property can not be treated as self occupied property as person has already occupied a rented house.

@ Generally such queries are raised by users who want to know whether they can claim HRA as well as house loan benefits for a property in same city. I just wanted to clarify, yes, they can but it would be treated as let out property and they need to show notional rent as well.

Thanks for confirming my views.

manish agrawal (Job) (28 Points)
Replied 15 March 2013

Actually quation is I stay in rented premises & purchase one property which will give possation after 2 years, Whether I can claim both HR & HL benefit during this two years??? Quick reply pl

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

As of now, You can claim only HRA. As far as exemption for housing loan is concerned, that would depend

on the situations after completion of the property.

manish agrawal (Job) (28 Points)
Replied 15 March 2013

Thanks for your quick reply. But why should not i claim HRA as well as HL benefit on the basis of fact that I am residing in rented premises & getting HRA and paying interest & prencipal for under construction property on bank loan. If not elegible as per above fact than kindly give section in which it was written.

Thanks

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

ok. Please let us know how you want to claim the benfits , as a self-occupied or let out propery, then I can answer concisely.

manish agrawal (Job) (28 Points)
Replied 15 March 2013

On the basis of it is nither self occupied nor let out property because in both the situation property should be at usable condition. In our situation it is under construction property.

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

Then, not at all, you can claim only HRA. Of course there are provisions to claim pre-construction period interest after completion of the house.

manish agrawal (Job) (28 Points)
Replied 15 March 2013

Can you pl give me the section as well as details for provision to claim preconstruction interest after completiion of construction

provisions to claim pre-construction period interest after completion of the house.

Read more at: /forum/details.asp?mod_id=242950&offset=2#.UUMu6_JRphk

rovisions to claim pre-construction period interest after completion of the house.

Read more at: /forum/details.asp?mod_id=242950&offset=2#.UUMu6_JRphk

Santosh Mishra (AM) (1135 Points)
Replied 15 March 2013

As per section 24, you can avail benefit of pre -construction period interest paid in five equal installments starting from the year in which construction has been completed.