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HRA and loan deduction for parents living in my home

A Jain (Design Engineer) (28 Points)

24 June 2011

Dear Sirs/Ma'am

I bought a house this year and availed a home loan for the same. My monthly EMI is approximatly Rs 65,000 (Rs55,000 interest and Rs8,000 principal). My parents are living in that house and I am living in a rented apartment just near to them. Both me and my parents live in Delhi and I work in Noida. I pay about Rs 5000 as monthly rent for the apartment. I have following questions:

1. Can I claim HRA, Home loan interest deduction and Home loan principal deduction under section 80C?

2. If I collect rent from my parents, say Rs 1000 per month, then can I claim a loss from house property of

(55,000x12 - 1000x12), where 55,000x12 is the total interest payment for the year and 1000x12 is the total rent payment?

I would really appreciate anyone guiding me the correct way to reduce taxes.

Thanks in advance

A Jain

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7 Replies

jaganathan (accounts executive) (272 Points)
Replied 24 June 2011

Yes you can claim HRA.

valji (Accounts manager-MBA) (2150 Points)
Replied 24 June 2011

Yes You can take the benefit of HRA under sec 10 & home loan under sec 80C

for claiming loss on house property you have take muncipal value ,actual rent standred rent whichever is higher

pawan gupta (Chartered Accountant) (47 Points)
Replied 24 June 2011

As per combined reading of sec. 10(13A) ,23, 80C you can claim HRA

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 24 June 2011

you can claim hra

Vikas (CA) (1135 Points)
Replied 24 June 2011

If an employee for employment purposes cann't occupy the house owned, then he can claim the HRA exemption u/s.10(13A).

Since the House Property is owned and let out, the assessee can also claim the deduction u/s.24(b) of unlimited amount of interest paid on housing loan along with the deduction u/s.80C for the principal repayment.[Note : the let out property will have to be compared in your case for the municipal valuation for calculating the reasonable lettable value.]

Sandeep Surana (Practicing Chartered Accountant) (156 Points)
Replied 24 June 2011

Answer :- 1. Yes, you can claim HRA U/s 10, Home Loan Interest U/s 24(b) and also Home Loan Principal U/s 80C Deduction for your taxation and you create your computation in this way for maximum reducing the Tax is as follows as mentioned below “Statement on Computation”.

STATEMENT ON COMPUTATION

Income from House Property

Net Annual Value = 60000/-(That's better for you if possible to increase this Amount)

Less: Deduction U/s 24

Standard Deduction @ 30% = 18000/-

Interest on Loan = 660000/- *

Income From House Property is equal to Rs. (-) 618000/-

* Deduction fully allowed when Let-out the house but if property not Let out(i.e. Self occupied) than maximum deduction allowed up to Rs. 150000/-

Income from Salary

Income from Salary is equal to Rs. (Assumed Figure) 720000/-

Note: You also claim for HRA as per IT Act.

GROSS TOTAL INCOME 102000/-

Less:- Deduction Under Chapter VI A

U/s 80C :- LIC Paid 0/-

Home Loan Principal 96000/-

Total 96000/-

But maximum amount allowed for deduction up to Rs. 96000/- **

TOTAL INCOME 6000/-

** As per IT Act, Deduction allowed under chapter VI A to the extent of positive Gross Total Income, so in this case deduction allowed fully(But Maximum up to 100000/-) but if gross total income is Negative than Deduction not allowed or allowed to the extent Positive Gross Total Income.

NOTE :-

1. You Must take as property let out to Father so as the Maximum Deduction allowed from Interest on Loan

2. If your salary is less than assumed figure than you increased the amount of Rent Received(so as to possible) Therefore the result is, you able to claim fully deduction under chapter VI A.

3. If your salary is less than assumed figure and if not possible to increased the Rent than No Deduction allowed Under Chapter VI A(beacause Gross Total Income is Negative) BUT Loss arise from House Property is Carry forward in next 8 years and set-off against House Property Income.

(Guest)

Mr. A jain

There is no problem in claiming HRA exemption and also deduction u/s 80C. But the problem is whether to treat the property as self occupied for residence or let out to parents.

Total interest pay out is Rs. 6,60,000.

Suppose it is treated as SOP-R then maximum deduction of interest can be claimed is Rs. 1,50,000 from which you are not satisfied. Therefore let it out to parents. Let us do it.

I assume the market rent as 20,000 p.m. (i could guess it from your interest amount)

2,40,000

(72,000)

(6,60,000)

(4,92,000)

So now you are happy. But do make sure your parents file has this 2,40,000. There should cash transfer from your account to your account.

If you are taking a token amount of rent from your parent then AO might apply the theory of avoidance of tax.

Thanks

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