Claiming HRA and Home Loan Tax Benefits in the Same City – Know Your Benefits

If you are living in a rented house while repaying a home loan for a property in the same city, you might be wondering, "Can we claim HRA and home loan benefits in the same city?" It is a common question among working professionals and homebuyers, and the good news is that in most cases, it is possible! Let us break it down step by step.

Understanding HRA and home loan claims

Before we dive into the question, it is important to understand what HRA (House Rent Allowance) and home loan deductions are and how they work.

• House Rent Allowance (HRA): HRA is an allowance that employers give to their employees to help with renting a home. You can claim this allowance as a deduction under Section 10(13A) of the Income Tax Act. The amount you can claim depends on the rent you pay, your salary, and the city where you live. However, if you are living in your own house and not paying rent, you cannot claim this allowance.
• Home loan deduction: When you take out a home loan, you can claim tax benefits on both the principal repayment and the interest paid. Under Section 80C, you can claim a deduction for principal repayment (up to Rs. 1.5 lakh per year), and under Section 24(b), you can claim a deduction of up to Rs. 2 lakh on the interest paid on the home loan.

Claiming both HRA and home loan tax benefits in the same city

Now, the big question: can we claim HRA and home loan in the same city? The answer is yes, you can claim both in the same city, but under specific conditions.

1. Renting a house while owning one

The key factor here is that you must be paying rent for the property you are staying in, even if you own another property in the same city. Let us break this down:

• HRA claim: If you live in a rented house, you can claim HRA, even if you own another property in the same city. The property you own should not be occupied by you, and you should not be staying in that house. The rented property must be your primary residence.
• Home loan claim: On the other hand, if you are repaying a home loan for a property you own, you can claim the deductions for principal repayment under Section 80C and interest repayment under Section 24(b), even if that property is in the same city.

2. Example to understand better

Let us consider a practical example. Suppose you work in Mumbai and you live in a rented flat in Andheri. You also own a property in a different part of Mumbai but do not live there. You can still claim:

• HRA for the rent you pay in Andheri, as you are staying in a rented house.
• Home loan deductions for the property you own, provided you are paying the loan for it, and it is not rented out.

This situation is quite common in large cities where individuals may purchase homes for investment or future use but prefer renting in a more convenient location for work.

3. Tax implications

Both HRA and home loan benefits are separate tax deductions, and they do not overlap. This means that you can claim both simultaneously, as long as you meet the eligibility criteria. The amount of tax benefit you receive will depend on the amount of rent you pay and the interest and principal payments on your home loan.

It is also important to note that your employer may ask for proof of rent payments if you are claiming HRA. If you own a property, you may need to provide documents to show that the property is either unoccupied or being used for other purposes (like renting it out to someone else).

4. Limitations of claiming HRA and home loan benefits together

While it is possible to claim both HRA and home loan deductions, there are a few important things to consider:

• Location of the Property: If your home loan is for a property in another city, you can easily claim both HRA and home loan benefits. But if the property you own is in the same city and you are staying in a rented house in that city, you may face scrutiny from the tax authorities. They may ask why you are not living in your own property. Therefore, make sure the rented property is genuinely your primary residence.
• Ownership vs. rent: If you are living in a property that you own, you cannot claim HRA. You can only claim home loan deductions on the property you own.
• Documentation: To claim both, ensure you have the correct documentation for both the rent agreement and the home loan statements. This will help you avoid any complications when filing your tax returns.

How to maximise your tax benefits

If you are eligible to claim both HRA and home loan deductions, there are a few steps you can take to maximise your tax benefits:

• Rent agreement: Ensure that you have a valid rent agreement with the landlord. This helps in proving that the rented property is your primary residence.
• Interest payments: Keep a record of your home loan interest payments. You can claim up to Rs. 2 lakh in deductions under Section 24(b) for interest payments.
• Principal repayment: Do not forget to track your home loan principal repayments, which can be claimed under Section 80C. This is in addition to the interest deductions.
• Tax planning: Speak to a tax expert or financial advisor to plan the best way to claim both deductions and ensure that you are getting the maximum benefit from both HRA and home loan claims.

So, can we claim HRA and home loan in the same city? Yes, it is possible, provided you meet the necessary criteria. As long as you are renting a house while repaying a home loan for a different property (whether in the same city or another), you can claim both HRA and home loan deductions.

Explore Bajaj Housing Finance Home Loan

Now that you know all about HRA and home loan benefits, if you are planning to buy a house and need funding, look no further than Bajaj Housing Finance Home Loan. With affordable interest rates, flexible repayment options, and a hassle-free process, you can seamlessly transition from dreaming about your perfect home to owning it.

Here are a few key benefits of choosing Bajaj Housing Finance Home Loan:

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2. Low interest rates: Enjoy interest rates starting 8.25%* p.a, and EMIs as low as Rs. 741/lakh*.

3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.

4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.

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Take the next step toward owning your dream home with Bajaj Housing Finance Home Loan and enjoy a seamless borrowing experience tailored to your needs.