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Income from house property

19 November 2011

One of our employees has this situation. She has taken a housing Loan last month October 2011 and is paying pre-EMI interest from Oct 2011. The house construction would be completed in March 2012 and possession would be handed over then. She is currently staying in a rented premises for which she is paying rent from her salary and claiming HRA deduction. She will be moving to the new flat in April 2012.

Now can she claim the HRA deduction upto March 2012 and ALSO the pre-EMI interest (20% being equally distributed for five years) during the current financial year.

Regards

Raj

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7 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 20 November 2011

As per Section 10(13A) of teh I-T Act. exemptin under the said section is not available to the assessee if he is staying in the the house for whihc he has incurred the expenditure of rent.

Hence the employee can claim the exemptino u/s 10(13A) as also the deduction u/s 24 of 1/5th of the interest paid from Oct11-Mar12.

From F.Y.2012-13 he can claim deduction only in respect of serctin 24 i.e. deductin in respect of interest paid on borrowed capital taken for house property & no exemptino for HRA will be considered.

Z ( ) (2960 Points)
Replied 20 November 2011

Explanation of section 10(13A)

" For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where - (a) The residential accommodation occupied by the assessee is owned by him; or

(b) The assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him;"

Therefore HRA is exempted to the extent of the amount which is calculated by the criteria mentioned in the aforesaid provision. And as mentioned by Mr. Giridhar 1/5th of the interest paid and from 1st april the provision of section 24 shall apply and rent paid will be allowed to be deducted to the extent of rupees 1,50,000 and obviously no HRA (As mentioned by Mr. Giridhar)

EDIT:

Mr Giridhar you were right but I was confused by your this statement

"As per Section 10(13A) of teh I-T Act. exemptin under the said section is not available to the assessee if he is staying in the the house for whihc he has incurred the expenditure of rent."

Rajagopal M S (BPO) (52 Points)
Replied 22 November 2011

Yes, she is staying in the rented house and will be staying till end March. So, she can claim HRA exemption as well as pre-EMI for the new house during this financial year, right.

Regards

Raj

Z ( ) (2960 Points)
Replied 22 November 2011

In my opinion , Yes.

1 Like

Rajagopal M S (BPO) (52 Points)
Replied 23 November 2011

One more situation in this context:

A person has constructed a house in Tirunelveli Tamilnadu and has taken a housing loan for that purpose.The construction was completed last year and he is paying regular EMI for the housing loan. He is staying in a rented house here in Chennai on account of his job and is paying rent. His parents are staying in the constructed house in Tirunelveli. Can he claim both HRA deduction and Housing loan deduction (principal and interest) every year.

Regards

Raj

Z ( ) (2960 Points)
Replied 24 November 2011

Assesse is allowed deduction of HRA according to Explanation of section 10(13A) (above)

Interest expenses allowed u/s 24 amd Principle payments allowed u/s 80C (According to sec 80CCE, max 1 lakh including other deductions if any u/s 80CCC , 80 CCD or 80C alone.)