Friday, March 21, 2008

HRA AND HOUSE LOAN IN SAME CITY CAN BE CLAIMED.


on Friday, March 21, 2008

I have taken a House Loan for a new house which is far away ( around 16KM ) from my office.( My new house and office are in same city ).I am staying for rent near to my office.As of now my parents are staying at new house which was bought on House Loan.and I stay with my wife at the rented house.CAN I CLAIM BOTH HRA AND HOUSE LOAN FOR TAX BENEFITS ?
Sharath Chandra Reddy

As per income tax act both benefits are independent of each other and there is no relation what to so ever in claiming HRA exemption and House loan interest ,if person fulfill conditions to avail benefit given in ACT than he can claim ,and condition is be checked separately for each section.If law has not given any condition or linking in both the sections than why DDO are linking it ,I don't know.lets discuss with provision of the act.

HRA EXEMPTION(
HRA EXEMPTION HOW TO CALCULATE)
To claim HRA Exemption following point/condition to be satisfied.
  • Persons has a salary income and Getting House rent allowance
  • person has actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him.
  • The residential accommodation occupied by the assessee should not be owned by him.
In your case you full fill all the above condition ,means have a salary income ,getting hra ,paying rent and residing in Rented house.so you are eligible to claim HRA exemption irrespective of your house loan interest claim.

House loan Interest claim.

while calculating income from house property first annual value of house is to be determined.

  1. House is let out (value will be according to Rent received)
  2. House is self occupied by the owner for own residence. (annual value will be nil)
  3. house cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him(annual value will be nil)
in situation two and three value of house annual will not be nil if
  1. the house or part of the house is actually let during the whole or any part of the previous year; or
  2. any other benefit therefrom is derived by the owner.
more over if asssessee has more than one house which full fill condition two or three above than he can take this benefit of annual value as nil ,only on one house at his option.means Income tax act permits that a person can have more than one self occupied house but he can avail benefit only for one house and other houses will be deemed to be let out.

now in your case you are living in rented house so you are satisfying condition of Hra so you can claim hra exemption.

In case of your own house ,the house is self occupied by you ,it doesn't matter if you are going to house at weekend or monthly and your parents are living in your own house,it is covered under definition of self occupied under income tax act.As I have clarified above In income tax act self occupied definition is not the same as we generally taken and as per act person can have more than one house as self occupied ,and as per income tax self occupied means

  • house is not let out for whole or part the previous year
  • no any other benefit therefrom is derived by the owner
so you can claim house loan interest.

but i think you are covering yourself in condition three above i.e
"house cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him"

and want to clarify whether this condition is applicable in same city or not.Though in my opinion your house is self occupied as I have clarified above yet for your clarification in above condition also there is no condition that your own house can not be in same city.At any other place does not mean any other city it can be in same city ,but there should be nexus between non occupation of your house and your employment,business or profession .

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  1. one query

    the house is partly (50percent each) owned by me and father..but father does not stay with me....i give rent to my father for using the entire flat...can i claim hra exemption even though it is partly owned by me..kindly guide me

    ReplyDelete
    Replies
    1. Please do not try such tax plannings ,in my opinion it can be done but not advisable at all ,so avoid it

      Delete
  2. Dear Sir,
    I have recently joined a job in mumbai where I pay rent, but I am also paying rent in delhi where my dependent parents are staying. can i claim HRA exemption from tax for both the payments?

    ReplyDelete
    Replies
    1. You can claim only Mumbai rent where you are residing

      Delete
  3. My new home can not be self occupied because of long commuting hours from office to new home in the same city. so i am staying near to the office in a rented house. I can claim hra. Also If my new home is not rented or i am not getting any benefits from it, then can i claim the all the interests accrued by the bank loan or just 1,50000 ?

    ReplyDelete
  4. I took two housing loans. First one is for my dependent parents and second one is for myself.
    Query 1: What is the maximum tax benefit towards principal and interest for both loans?
    Query 2: Can I claim for 'Municipal Tax'?

    ReplyDelete
    Replies
    1. Your one house will be treated as deemed to be let out and you have to show rental notional income for that.

      point wise ans
      1.you can claim full deduction u/s 80C for repayment of loan for both house subject to maximum amount of 1,00.000.Further in case of one house (of your choice) maxi of 150000 and for deemed let out house without any limit.
      2. Municipal Tax deduction available only for let out house or deemed let out house and not available for self occupied house

      Delete
  5. I have taken a House loan jointly with my wife in Hyderabad. We both are employed and we are getting HRA. We are planning to give this new House as Let out (Rent) and planning to stay in rented house i.e., near to office in same city.
    Query 1: Can we both get HRA exemption? If Yes then what is the maximum limit per person?
    Query 2: Can we both get Interest & Principal Amount exemption? If Yes then what is the maximum limit per person?
    Query 3: How to claim for Let out income and what is the maximum limit?
    Query 4: Suppose my Let out income is RS 60,000/-. Can you explain interest exemption with example?

    ReplyDelete
    Replies
    1. Point wise answer is given below
      1. Yes you both can claim HRA exemption .Maximum limit is described here
      http://www.simpletaxindia.net/2010/02/hra-exemption-calculation-house-rent.html
      However if you share rent paid every month ,it is better that your wife pays first six month rent and you pay rest.Or if your hra amount is different then higher rent payment should be made by person who is receiving more hra /Exemption

      2.You both can claim repayment loan benefit u/s 80C up to maximum 1 lakh and Interest without any limit as house is rented out.

      3.let out income and interest will be share between you and your wife according to your share in property.

      4, as per answer 3 above

      Delete
    2. Hi Rajan,
      Thanks for the information.
      Could you please check the below and help me & my wife to declare HRA and other components related to the below.

      Property is being shared 50-50 among us.

      Interset amount paid per year = Rs 2,20,000/-
      Principal amount paid per year = Rs 32,000/-
      Muncipal tax paid per year = Rs 4,000/-
      Rent paid per month = Rs 12,000/- Per year = Rs 1,44,000/-
      Rent recieved per month = Rs 5,000/- Per year = Rs 60,000/-
      My HRA per month = Rs 10,000/- Per year = Rs 1,20,000/-
      My wife HRA per month = Rs 6,000/- Per year = Rs 72,000/-

      Delete
    3. please give details property wise , and basic plus da for your wife and city ., mode of payment in bank single or joint account and amount contributed by both of you in joint account if any

      Delete
    4. Property is joint registration and housing loan is also taken jointly. But EMI is deducting in my salary only.
      We are staying in Hyderabad and my wife's basic salary is 11,800/- per month and my basic salary is 29,000/- per month. Please let me know if you need any other information.

      Delete
    5. Suggestion
      Both of You should contribute 50 % emi .For old emi you should get reimbursement from your wife in your bank account and from future get 50 % each month from your wife.

      Point wise answer to query is given as under.

      1. Yes you both can claim HRA exemption .Maximum limit is described here
      http://www.simpletaxindia.net/2010/02/hra-exemption-calculation-house-rent.html
      However if you share rent paid every month ,it is better that your wife pays first six month rent and you pay rest.Or if your hra amount is different then higher rent payment should be made by person who is receiving more hra /Exemption

      From your data it is more beneficial that only you should claim HRA exemption .As you falls under higher slab and 12000/- pm rent is not sufficient to claim exemption by both of you. You will get least of following as hra exemption pm

      .HRA received (10000)
      .rent paid in excess of 10 % of salary (12000-2900)=9100
      .40% of salary =11600

      least is 9100 so you can get maximum 9100 per month
      Please note that salary here means basic pay plus da ,so kindly edit data if you are getting da also.

      2.You both can claim repayment loan benefit u/s 80C up to maximum 1 lakh and Interest without any limit as house is rented out.

      As per your data you have paid 32000/- Rs so both of you can claim 16000 each. Please take necessary step given in suggestion above.

      3.let out income and interest will be share between you and your wife according to your share in property.

      As you are 50-50 holder .Income from house property will be shown as under in both case

      Rent received (50% of 60000)=30000
      less :Municipal taxes(50 of 4000)=2000
      House net income=28000
      less 30% standard deduction for repair=8400
      less :50% of interest 220000=110000
      Loss from house property=28000-8400-110000=90400

      so both of you can claim loss of house property 90400 each and deduct it from your salary Income.

      4, as per answer 3 above

      Delete
    6. Thank you Rajan...for the detailed explanation.

      I have one more query: Will I get any tax exemption for House insurance or Home loan insurance?

      Delete
    7. No benefit for house insurance in income tax .

      However home loan insurance is generally a life insurance term plan policy of Borrower .So get the details from bank about the policy ,if it is life policy (term policy) then you can claim benefit under section 80C

      Delete
  6. Hi,
    I am staying in Pune and hvaing own house in my name. But in my own house my parents stay. My self & my wife stay in rented house. Will I be eligible to claim for HRA for IT benifit.

    ReplyDelete
  7. Hi,
    I was on rent for 6 months due to self owned property on repair. Please advise if I can claim HRA for 6 months and also full interest as loss on property. Thank you

    ReplyDelete
  8. Hi Can as a part of tax planning, i can give rent to my parents in whose name the house is and who are staying alongwith me and whether answer would be different had they not been staying with me.

    ReplyDelete