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The exempted amount is determined based on section 10 of the Income Tax Act. This tax benefit is available to professionals only for the period when they rent a house. 1) However, if you have a home loan running but the home is still UNDER CONSTRUCTION, and during that period if you are staying in a rented house?
Let us understand the conditions that will allow you to claim both the tax benefits together. There may be case where you have rented a place where your spouse/parents stay while you own a house at the city of your employment and stay there. In this case you cannot claim HRA tax benefit as HRA is paid for staying on rent for purpose of employment.
The conditions for claiming the tax benefits for home loan
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The only thing to keep in mind is that the EMI should be an amount which you can pay back easily every month. IndiaLends has tied-up with almost all lending institutions, large and small. HDFC, ICICI, SBI, Kotak, IndusInd, Tata Capital, Bajaj Finserv, IDFC First, IIFL, IndiaBulls, RBL Bank, DHFL, Aditya Birla Finance, American Express, etc. are some major banks of the country we have tied up with. Depending on his need รข€“ short-term or long-term - borrower can ask for a tenure that suits his needs.
Claiming tax benefits on home loans
Cities have become bigger, and for many it may take several hours for a one-way commute to the workplace. Many people prefer to move their accommodation closer to their workplace to reduce their commuting hours. Also, the HRA and home loan disbursements are managed under various sections of the Income Tax Act.
50 per cent of basic salary in case the employees is in any of the four metro cities, or 40 per cent in case he resides in any other place. Get live Share Market updates and latest India News and business news on Financial Express. However, interest on unpaid interest or penalty for the same shall not be allowed as a deduction.
Can you claim both, HRA as well as home loan benefits?
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To claim tax exemption, an employee must be paying rent for the house that he actually occupies. In case an employee lives in his own house or does not pay any rent, he cannot claim an exemption for HRA. The legal provisions in respect of HRA are contained in Section 10 of the Income Tax Act and rule 2A of Income Tax Rules. These provisions do not provide that HRA benefit cannot be claimed if you own any house. Even for the house bought with home loan and situated in the same city where you are working, occupied by your parents, you can still claim HRA benefits provided you stay in another house and actually pay rent for that house while claiming the benefits for home loans.
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You cannot become the owner of the property, if you have not obtained possession of the same. However, this need not necessarily be physical possession and can also be in the form of handing over of the keys. So, this benefit cannot be claimed for an under construction property, till construction is completed and possession taken.
Though the owned property might be vacant or occupied by other family members you can still treat it is as a self-occupied house. "The law permits an individual to claim deduction for interest on housing loan for a property which cannot be occupied by the individual due to his employment, business or profession carried on at any other place," says Iyer. HRA deduction, along with home loan interest, cannot be claimed by self-employed individuals and is only available to salaried individuals who own a house but are living in rented accommodation. Moreover, if your rented accommodation is in the same city as the one in which you are buying a house, (except it is an under-construction property, or you show a valid reason for being unable to move into your home), you cannot claim HRA deduction.
Due to his work, he resides in a rented accommodation in the Northern part of Delhi and receives HRA from his employer. Due to his work, he resides in a rented accommodation in Bangalore and receives HRA from his employer. 40% of salary (50% for rented accommodation in Delhi/Mumbai/Kolkata/Chennai) for the relevant period. An online HRA exemption calculator has made it easy to calculate the HRA benefit.
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Below, we’ve mentioned some of the key features of an easy personal loan you can get through IndiaLends. The benefit should be claimed only in genuine cases and not for tax evasion. So, in case you have let out your own house and receive the rent in cash and have taken a house on rent, it is advised to refrain from misusing the provisions of the law, to evade the legitimate dues to the government. You can also claim both the benefits, if your house is let out and you are declaring the rent in your ITR and are paying rent for another accommodation. It is also not available, in cases where the accommodation is either partly or fully owned by the assessee himself. So, if an employee lets out a property owned by him to his employer and the employer, in turn, allots the same to the employee and recovers some rent on this account, the HRA benefit cannot be claimed.
The conditions for claiming HRA are different and those for claiming home loan benefits are different and are mutually exclusive. It is also worth mentioning that from this year, the government has allowed treatment of two properties as self-occupied in terms of income tax deductions and implications if they are used for one's own residential purposes. Earlier, only one property was treated as a self-occupied property and the rest were assumed to be rent out for tax purposes. Now we are left with the second owned house being in the same city where you work but are living on rent. The only factor that can help you claim the second property as self-occupied would be proximity of your rented accommodation to your place of employment. However, if you claim a tax deduction on HRA but do not live in the rented housing, the Internal Revenue Service may pursue you.
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