Home loan and HRA Tax Benefits

• You can take an HRA and a home loan simultaneously in specific scenarios, subject to the fulfilment of applicable conditions.
• To take HRA and a home loan simultaneously, back your submission with valid reasons and supporting documents, as applicable.
• There is always a possibility of receiving a notice from the Income Tax Department. You must be in a position to substantiate your claims.

HRA (House Rent Allowance) helps reduce your tax burden and manage your taxes effectively. Likewise, home loan offers similar benefits. While both help to save tax, can you use them simultaneously? While technically you can, there are a few things you should keep in mind when making such claims.Read on this blog as we address the most pertinent question in your mind, i.e. ‘Can I take HRA and a home loan simultaneously?’.

Before exploring ‘Can I take HRA and a home loan simultaneously?’, let’s first understand the tax benefits of HRA and home loan. HRA Benefits Under section 10 (13A) of the Income Tax Act , you can deduct the eligible amount from the HRA received. This deduction amount is the least or minimum value of the following:

• Actual HRA received
• 50% of salary in case of metro cities/40% of basic salary in case of non-metro cities
• Actual rent paid ‘less’ 10% of basic salary

Note: Salary refers to the sum of basic salary, DA (Dearness Allowance) , and any other commissions as applicable. Note: Metro cities include Delhi, Mumbai, Kolkata, and Chennai.

In the case of a home loan, you can claim a deduction of up to ₹1.5 lakh for the principal portion and a maximum of ₹2 lakh for interest. You deduct this amount from your earnings, reducing your tax liability in turn. These deductions are subject to the conditions mentioned in sections 80C and 24(b), respectively. Also Read: Home Loan Process - Step-by-Step Procedure to Get a Home Loan

There are certain scenarios under which you can take an HRA and a home loan simultaneously. However, you need to satisfy the applicable conditions.Here are some instances where you can generally enjoy both benefits. Please note, the tax benefits may vary on a case-by-case basis. For further clarity, you may consult your chartered accountant. Homeownership without Occupancy There could be a scenario where you purchased a property on a home loan. But, you reside on rent in another property. In this case, you could take HRA and a home loan simultaneously, provided these properties are in different cities.However, you need to justify your stay in a rented property. Long distance between home location and office, transfer from home location to another city, etc,. are examples of justifiable reasons. Living on Rent While Letting Out Own Property If you shift to a rented home to reduce the travel distance to your office, in such cases, you could take HRA and a home loan simultaneously.However, it is important to note that you will be required to submit the details of your rental income and pay the applicable taxes. Renting Due to Under-Construction Property Another common scenario where you can take HRA and a home loan simultaneously is when you are staying on rent till your residential property for which you have taken a loan is under construction.

When you take HRA and a home loan simultaneously, it is important to back your submissions with valid reasons and supporting documents, as applicable. There is always a possibility of receiving a notice from the Income Tax Department.You must be in a position to substantiate your claims. Inability to do so may result in penalties and additional liabilities. Have Valid Reasons to Take HRA and a Home Loan Simultaneously To summarise, you can take HRA and a home loan simultaneously, provided you fulfil your applicable conditions and can justify your claims. Valid proofs and reasons simplify the tax filing process and prevent penalties.Likewise, legal and complete documents are necessary for smooth home loan processing. This helps you get the needed financial assistance in a quick and hassle-free manner.