ITR filing: Can a salaried taxpayer claim deductions for HRA and home loan interest together? Old tax regime offers two very prominent deductions to the salaried taxpayers on house rent allowance and home loan interest payment. However, not many people claim both deduction together despite being eligible to do so. Here is how you can decide if you can claim both the deductions
If you fall in the highest income tax bracket, there is hardly any scope for you to save a higher amount as income tax in the new tax regime. However, the old income tax regime still allows you to claim more deductions to bring down your net taxable income and pay much lower income tax.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} Among these, the deductions on home loan interest and house rent allowance (HRA) are the two prominent avenues to save taxes. However, very few salaried taxpayers claim both these deductions together despite being eligible to do so. We tell you how to claim both these deductions together and save a significant amount of income tax. Here is how these two deductions work:
Home loan-related deductions
Section 80C: Up to Rs 1.5 lakh each financial year on account of principal repayment of home loan
Section 24B: Up to Rs 2 lakh each financial year on account of interest payment of home loan taken for a self occupied house
HRA-related deduction
Section 10 (13A): Least of the following
●HRA received as part of salary
●40% or 50% of basic salary depending on city
●Amount after deducting 10% of basic salary from actual rent paid
Home in one city but living on rent in another city
Given the job dynamics in India, it is not uncommon for many people to shift to another city either for the sake of remaining employed or for better career prospects. So, if you have taken a home loan for a house in one city but moved to another city later due to job requirements, you are very much eligible to claim both deduction on the loan and deduction on HRA.
In some cases, people live in rented accommodation in the city where they work but take a home loan to construct or buy a house in their hometown. They, too, can also claim both HRA and home loan-related deductions together.
The basic criteria that must be met to be eligible for HRA deduction is that you should have the rented accommodation only in the city where you work. When it comes to home loan interest deduction, it can be claimed both in case of a house being self-occupied or given on rent. However, deduction for principal repayment can only be claimed in case of a self-occupied house.
Self-occupied home and rental accommodation in the same city
Daily commute to the office can take several hours, especially if you are living in a big metro city. You might live in your own house but would have to travel a long distance to reach your office in another part of the city. Many people prefer taking a rented accommodation near their place of work so that the office commute becomes manageable. In such a situation, you may be able to claim deductions for both HRA and home loan interest together provided you have evidence to prove that you had to rent a house in another part of the city — one that is far away from your own house — for employment.
Let-out property and rental accommodation in the same city
If you have a let-out property either in another city or even in the same city where you are living in a rented accommodation, you can very well claim deductions on both HRA and home loan interest payment. Here you must remember that in case of a let-out property, you cannot claim deduction for principal repayment of your home loan.
However, most taxpayers in the highest income tax bracket hardly have any scope left for deduction under Section 80C. There are many competing expenses other than home loan principal deduction that you can claim under 80C to exhaust the deduction limit of Rs 1.5 lakh: EPF contribution, school fee of children, PPF, NSC, life insurance policy premium, ULIP, ELSS, etc. So, you may not even need to claim deduction for principal repaid on your home loan. However, there is no such competition when it comes to claiming deduction on home loan interest payment under Section 24b.
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This story originally appeared on: India Times - Author:Faqs of Insurances
