Both HRA exemption and Interest Deducton Can Be Availed Simultaenously
January 8, 2007 by taxworry · 3 Comments
Can I claim deduction for HRA for apart of the year and interest on housing loan for the rest of the year. If the house is rented for the year, can I claim HRA for the whole year. Further can I claim Interest on housing loan as a deduction from my rental income. neeluraideva@yahoo.com
Yes ,a person can avail both , if he satisfies conditions of both the provisions.
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For claiming exemption on HRA foremost condition is that the assessee should pay RENT, only then one can claim exemption from HRA u/s 10[13A] of the I T Act read with rule 2A of the I T Rule.If you pay rent for whole year , you can claim exemption for the whole year. If you have paid for part of the year , you will get even then exemption.
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Deduction of interest on loan is allowed only in three case
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Tthe property is given on rent.
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The property is self occupied
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The property could not be self occupied on account of service/occupation, one can not live in the house.
So in case , you have taken loan for a house or flat which is not given on rent and which is also not self occupied for any reason and if that reason is not related to occupation, as per the law , you will not get deduction of interest of loan. This however is an exception.
If you have self occupied the house during the year and also paid , for some reason HRA for the whole year, you will be allowed exemption on HRA as well as the interest from the month you self occupied the house.
I have a doubt on this. when I asked teh same question to my employer, he was showing me a ready reckoner book which says, the exemption from Home loan (Interest + Principal) and HRA can be availed simultaneously if the house is located in some other city (specifically it has mentioned “city”) and we are staying in some other place for work related needs.
Could you please clarify more on this.
The actual case as follows:
I am staying in Bangalore in a rented house near to my office. I bought a house almost 15km far from my office (but both are in same city) and practically it is difficult to stay at my own home and daily travel to office. So, in this scenario, can i avail both HRA and home loan benefits? Please advice.
Dear Sk,
Income tax Act does not speak about living in TWO cities. But the condition is that if “owing to employment ” , a person is not able to live in his house he can claim interest deduction u/s 24(3).
The issue whether “living elsewhere in Same City ” was settled by Delhi High Court in CIT/CWT v. Justice Avadh Behari Rohtagi [1986] 157 ITR 441 .Briefly facts of the case was “The assessee is a sitting judge of this court. He has his own property at 419, Esplanade Road, Delhi, which is a residential house kept vacant by him. At the same time, the assessee resides at an official residence provided by the State at No. 6, Dr. Zakir Hussain Road, New Delhi. The question raised by the assessee was that he was entitled to the exemption provided by section 23(3) of the Income-tax Act, 1961. The exemption is to be granted when a person by reason of his employment, business or profession carried on at any other place has to reside at that other place in a building not belonging to him. It is clear that the assessee is residing in a building not belonging to him and he is residing there because his official business requires him to reside there. The controversy that can be raised and has been raised on behalf of the Department is that Delhi and New Delhi are not other places but are the same place.”
Delhi High Court held that deduction u/s 23(3) is allowable.
So, you will get interest u/s 23(3) even if , you are living in same city owing to employment.
In my case, I am not staying in my owned house due to some family problem (not related to occupation at all). Am staying with my grand parents & also pay rent to them.
Can I still get the benefits of both HRA & Housing loan interest paid??