HRA and home loan


I have a home loan. Can I claim HRA?


Hi Reba,

In case you have purchased a residential property on loan, but you live in another home which you pay rent for, you can claim available tax benefit for HRA as well as against the Home Loan. The condition, however, is that both rented and owned property should be in different cities.

You also have to furnish the reason for not living in your own home, which can be job location being different from home location, long distance from home to office, a transfer from home location to another city and others, as long as it is reasonable.

Another scenario is where you may have taken home on loan for a residential project which is under construction, so you live in a rented home till your own home is completed. In such a case, one can claim the benefit of both Home Loan tax deduction and HRA.

The caveat though is that a claim can be made only for interest repayment and post possession of house you are allowed to get such deductions in 5 equal instalments in the next 5 years after completion. You are not allowed to claim a deduction against principal repayment in such case. HRA can be claimed until completion as per your city and salary breakup as stated above.

In case you are letting out your own house and live in a rented house, you are allowed to claim tax benefit against home loan as well as HRA. There could be several reasons for putting your owned home in rent such as the requirement of a bigger home, change in office to a distant location from own home and a similar change in preferences. You’ll be required to furnish the rental income from rented out property and such income will be taxable as per the applicable rate. You can claim HRA as your limit states.

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BB Expert