Claiming tax benefit on both hra and home loan

Tax queries 356 views 2 replies

Yess Bee

Bci

28 Points Joined March 2012

Hi Experts,

Can an employee claim HRA as well as benefit on home loan(principal + interest) in the case of

- if he is residing in a rented apartment

- he is constructing a new own house.

- he is paying partial EMI on the housing loan.

- the house being constructed is in the same city he is residing in.

Please clarify.

Cheers....

Replies (2)

Vishal Goel

Chartered Accountant

1693 Points Joined April 2014

hello, The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are not interconnected to each other. HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence, feel free to avail both tax benefits accordingly.

However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded.

Vishal Goel

Chartered Accountant

1693 Points Joined April 2014

The Interest that has been paid before the completion of construction should be aggregated and the whole aggregated amount shall be allowed as tax deduction in 5 equal installments for 5 successive Financial Years starting from the year in which the construction has been completed.