13 February 2014
My brother(salaried) has purchased a resale 3bhk flat in an in an adjoining building in the apartment complex where he presently resides on rental basis.He wishes to continue living in the rented flat & give his own flat on rent so as to enjoy the benefit of availing the deduction of Housing Loan interest of Rs.7,00,000/- from his annual income and also avail HRA benefits.He will be offering the rent earned on his own flat for taxation as per IT rules.
Experts, kindly let us know if it is legally allowed to avail Sec 24 & HRA benefits as above. Can the assessing ITO raise any objection & disallow the same. Thanks & Regards K Raja
13 February 2014
yes it is allowed... the only two conditions to satisfy under HRA is that rent should actually be paid and the house against which rent is being paid should not belong to the assessee.
As long as both of the above is satisfied, HRA can be claimed. income from house property is covered under a different head and is not in any manner controlled by HRA. So you can claim both.
13 February 2014
Thanks Nikhilji, I request you to advise in the below situation.
Mr A lives in Bldg No.3 in ANANDVAN HSG COMPLEX ON RENTAL BASIS. He purchases a flat in Bldg No 2 in the same ANANDVAN HSG COMPLEX with Home Loan of Rs.70 Lakhs. Thereafter,he continues to live in Bldg No.3 on rent & lets out on rent his own flat in Bldg No.2 in the same complex.He will offer the rent earned for Income Tax as per rules.
Mr.A wishes to set off/reduce the entire Home Loan Interest outgo of over Rs.7 lakhs from his annual income.Pl. advise if it is Legal to do this.Can the assesing ITO raise any objection & disallow the benefit of setting off the entire Home Loan Interest outgo of over Rs.7 lakhs. Thanks & Regards K Raja
26 July 2025
Here’s a detailed explanation based on your brother’s situation regarding **Home Loan Interest deduction under Section 24(b)** and **HRA exemption**:
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### 1. **HRA Exemption**
* Your brother **can claim HRA exemption** from his salary income **if he pays rent for the flat he occupies**. * **Condition:**
* Rent should be **actually paid** for the flat where he resides. * The rented house should **not belong to him** (i.e., he should not own the flat he is paying rent for). * Since your brother **lives in a rented flat (Bldg No.3)**, and pays rent there, he is eligible for HRA exemption from his employer for that rent paid. * The fact that the owned flat (Bldg No.2) is in the **same housing complex does not disqualify HRA**, provided he pays rent for the flat he occupies.
* Your brother owns a flat (Bldg No.2) which is **let out on rent**. * Interest paid on the home loan for this flat is **deductible from income under the head "Income from House Property"**. * For **let-out property**, the entire interest paid on the home loan is allowed as a deduction (there is no upper limit). * Since the flat is **rented out**, he will show rental income under **Income from House Property**, and deduct interest paid as an expense, potentially resulting in a loss from house property which can be set off against other income.
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### 3. **Can he claim both HRA exemption and Home Loan Interest deduction?**
* Yes, he **can claim both simultaneously**. * HRA exemption is related to the rented accommodation where he **actually resides**. * Interest deduction is related to the **property owned and rented out**. * These are **independent claims**, under different heads of income:
* HRA exemption is from **salary income**. * Interest deduction is from **income under House Property**.
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### 4. **Will the ITO raise objections?**
* As long as the facts are genuine (he **actually pays rent** for the flat he resides in, and owns the other flat which is rented out and rental income declared properly), the **claims are legally valid**. * The ITO **should not disallow** these benefits if proper documentation and records are maintained (rent receipts, loan statements, tenancy agreements, etc.). * The proximity of flats in the same complex is **not a disqualifying factor** by itself.
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### **Summary**
| Claim | Applicable? | Conditions/Remarks | | ---------------------------- | ----------- | ------------------------------------------------------------------ | | HRA Exemption | Yes | Rent paid for flat actually occupied & not owned | | Interest Deduction (Sec 24b) | Yes | Interest on home loan for rented out flat deductible without limit |
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If your brother keeps proper records and clearly declares the rent received, rent paid, and loan interest, both benefits can be legally availed without fear of disallowance.
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**Would you like me to help draft the documentation or organize the proofs to strengthen the case if required?**
CAclubindia
