How to claim HRA and home loan benefits
[Submitted by CA. Praveen Chopra
The documents required to claim deduction and implications of joint ownership of property.
Documents required for claiming deduction
In order to claim the deduction of the housing loan repayment, you are required to furnish a certificate from the lending institution stating the principal amount paid, as well as the interest amount due for the whole financial year.
Usually, salaried employees obtain a provisional certificate from the lending institution in the month of February or March, which states the actual amount of installments paid and payable for the financial year.
This certificate alongwith a declaration is usually submitted to the employer since the tax laws permit the employer to adjust the loss under the head House Property against the salary income while calculating the tax deducted at source on the salary income.
The final certificate is usually issued by the lending institution after the close of the financial year. If the employee does not submit the details of loss under the head House Property to the employer, the benefit of the loss/ deduction can be claimed at the time of filing the return of income.
House rent allowance
HRA forms a significant part of the salary income of many people. And, when they take a housing loan and claim deduction on account of interest and principal, they wonder if there is any way they can continue claiming some sort of relief on HRA as well.
HRA exemption and deduction of interest on loan for house property (as applicable to self-occupied property explained last week) can be claimed in the same financial year if the following conditions are satisfied: You could not occupy your own property because of employment in a city other than the city where the property is situated; your property is lying vacant and no benefit is being derived therefrom; and you receive HRA and pay rent at such other place for the purpose of your residence while in employment.
You may own property jointly with one or more persons and may take a joint housing loan for the same. In order to claim the tax exemption individually, you need to ensure that the property is registered in the joint names and the share of each individual is definite.
For example, if the property consists of two floors and are registered separately in a woman's name and her husband's name, then both of them are eligible to claim deductions as explained above separately. In case of joint ownership, payment has to be made from one account or two separate accounts, one of each individual.
In many cases, a joint loan is taken for a jointly-owned property and the repayment of the same is made from the bank account of one of the co-borrowers or from a joint bank account. In case of a joint bank account, the repayment of the loan by each co-borrower should be from his/her taxable income.
However, where only one borrower makes the repayment of the loan and all other co-borrowers transfer their funds to his account, it may become difficult to claim the exemption for other co-borrowers since this method of repayment can be disputed by the tax authorities.
Thus, it is important to ensure that the title of the property is in the name of the individual and housing loan installments are paid by that individual out of his taxable income in order to claim the tax benefits. So if you have taken a housing loan or are about to avail of one, keep the aforesaid tips in mind to get the maximum tax saving benefits.