Extent of Tax benefits in case of short service

Need your assistance on below scenario.

I worked from Apr'20 to Oct'20 in an Organization, onwards Oct'20 I have a tax free salary in another organization. In this situation I want to know,

1) how much benefit of Principal and Interest I can avail on my existing Housing Loan. Should this benefit amount amount be divided by 6 months of service ( Apr to Oct) to avail tax benefit or can it be fully claimed ( whole year amount) for tax benefit?

2) I live in rented accommodation and paid House rent for full FY 2020-21, but my employer did not include exemption in computation of Form 16 due to Covid situations. So can I claim it while filing my ITR, if so, where and how much to claim? Full year or only Apr'20 to Oct'20?

Hi Peioush, here’s a clear breakdown for your questions about tax benefits given your service period and housing situation in FY 2020-21:

1) Tax Benefits on Housing Loan (Principal & Interest) for Short Service Period

Principal Repayment (Section 80C):
You can claim deduction on the actual principal amount you paid during the financial year, regardless of how many months you worked.
So, even if you worked only from Apr to Oct 2020, claim the full principal repayment you made in FY 2020-21 (April 2020 to March 2021). No need to divide by months of service.
Interest on Housing Loan (Section 24(b)):
Similarly, claim the actual interest you paid on the housing loan during the financial year, up to ₹2 lakh if it's your self-occupied house.
Again, no need to restrict it to months of employment; claim for the full FY.
The tax benefit depends on actual payments made during the FY, not the period of employment.

2) House Rent Allowance (HRA) Exemption When Employer Did Not Include It

Since your employer did not provide HRA exemption in Form 16, you can claim it while filing your Income Tax Return (ITR).
How much to claim?
- If you paid rent for the full financial year, you can claim HRA exemption for the entire year.
- The exemption is calculated as per the normal HRA rules (least of these three):
  1. Actual HRA received from employer
  2. Rent paid in excess of 10% of salary
  3. 50% of salary if living in metro city; else 40%
If your salary was tax-free after Oct 2020, and no HRA was paid from Oct onwards, claim HRA exemption only for the months you received HRA (Apr to Oct 2020).
Where to claim in ITR?
- In the Income Details section, under Exempt Income, there is a field for HRA exemption.
- Fill in the correct exemption amount as per your calculations.

Summary

Point	What to claim
Housing loan principal & interest	Actual amounts paid in FY 20-21 (no pro-rata)
HRA exemption	For months salary with HRA (likely Apr to Oct) if no HRA from Oct onwards; claim in ITR