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FAQ on Housing Loan and HRA

FAQ on Housing Loan and HRA

What Law says:
The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are dealt separately under Income Tax Act. HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence both tax benefits can be availed depending on the scenario.

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  1. How much amount is permissible as deduction for Housing loan principal and Interest?
    • Principal is allowed up to Rs.1 Lac u/s 80C and Interest is allowed up to Rs.1.5 Lac u/s 24.

 

  1. Can both the co-owners take the benefit of Housing loan?
    • Yes, each co-owner can take the benefit of Housing loan up to the amount specified above. For e.g., if total principal paid during the year is Rs.1.8 Lac and Interest paid is Rs.2.4L then each co-owner can take the benefit of Rs.90000 on principal and Rs.1.2L on interest, provided they own the property in the ratio of 1:1. In other words, co-owner can take the benefit of housing loan in the ratio of Loan.

 

  1. You live in your own house purchased with home Loan.
    • Since you are residing in your own house, you will not be able to claim HRA.
    • However, you will be able to claim tax benefits on both the principal and interest repaid on the home loan.

 

  1. You bought a house with home loan in another city but living on rent in other city.
    • Entitled to HRA exemption.
    • Entitled to tax benefits on both, the principal and interest repaid on the home loan.

 

  1. Can I claim deduction of housing loan on 2 house property?
    • Yes, Subject to the limit specified in earlier part of FAQ.

 

  1. The house is under construction with home loan and living in a rented apartment in same city.
    • Eligible to claim HRA.
    • Benefit of interest paid for the under construction period can be claimed in five equal installments commencing from the Financial Year in which house is completed.
    • Benefit of interest for the post completion period can be claimed in the respective financial Year.
    • Benefit of principal can be claimed from the financial year when possession is received. Tax benefit on principal repaid earlier is lost forever.

 

  1. You own a house ready for occupation in Delhi but you aren’t residing in it but are living in a rented apartment in Delhi itself for genuine reasons e.g. the house that you have bought is far away from your office.
    • HRA can be claimed.
    • Home loan benefits which include both principal and interest repaid on the home loan can also be claimed.

 

  1. I work in Gurgaon and live in a rented property. I own a house in other city and receiving rent from there. Can I claim HRA and benefit of Housing loan that I own in other city, as mentioned.
    • HRA can be claimed.
    • You can show income from House property (rent Income) reduced by amount of Interest. Kindly make a note that there is no limit of deduction on account of Interest. For e.g., If you receive rent of Rs.60K in the year and have paid interest of Rs.4 Lac then you can claim the loss from house property with interest deduction of Rs.4 Lac.

 

  1. Deduction for housing loan has been raised by Rs.1 Lac in budget 2013. What conditions has to be satisfied to claim additional benefit of Rs.1 Lac?
    • You are a “First time house buyer”. It means that you don’t own a house property.
    • You have bought a new house and cost of the house should not be more than Rs.40 Lac.
    • Loan does not exceed Rs.25 Lac.
    • Loan is approved and taken on or after 1-April-2013.
    • This scheme is only for Individuals (HUF are not entitled for this benefit).
    • This is temporary scheme and valid for only one Financial year i.e., 2013-14.

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3 Comments
  1. My fiance’ is working in a MNC in Jaipur and he has a permanent residence over there. Now, he wants to relocate in Kolkata, can he eligible for a home loan from any bank in West Bengal? If yes, which are bank can you suggest?

    • Yes, she is eligible provided she meets all the requirement. At times projects are approved by certain banks only. Therefore it is better to approach those banks that have approved the project.

  2. Hi Jis,

    I am working for a company in Gurgaon (Haryana). I am staying in a rented house in haryana which is near to my office. I have two flats(in Ghaziabad & Delhi) for which I have taken home loan.If I am not staying in both the houses and given the ghaziabad property on rent and delhi property is lying vacant and is expected to have tenant in future.,

    1) Can I avail tax benefits on both home loans.I would be more interested in the “interest ” part of both (delhi & Ghaziabad) the loan. (As 1 lac limit for 80C is already consumned by my LIC)
    2) Can I avail HRA for the Gurgaon house for which I am paying Rs 18,000 per month rent

    I can show rents on both houses as my income and can I get HRA benifit too as I am staying in rented home?

    Thanks,
    Basant

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