Tax benefit on Home Loan and HRA both


As there might be the situation where you are living in the rented house despite of holding ownership of other house. If you are experiencing the same then this article is for you. In this scenario, Income tax act provides something good for you. Now what is that, we can claim exemption of HRA we are getting from the employer and deduction on Payment of Principal amount and Interest on home loan.

In this Article we are going to discuss the tax benefits provided in the Income Tax Act to the home loan buyer.

Here is the exemption that home loan buyer can apply for-

  1. HRA exemption towards rent payment, if he is paying the rent on other property.
  2. Deduction on Home loan interest as per section 24(b)
  3. Principal repayment of home loan u/s 80C

Conditions for Claiming HRA

Here Section 10 (13A) of Income tax Act, 1961 provides for HRA exemptions, read as under-

Any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent  in respect of residential accommodation having regard to the area or place in which such accommodation is situate and other relevant considerations.

Exemption in respect of HRA would not be allowed in following situation-

  1. the residential accommodation occupied by the assessee is owned by him or
  2. the assessee has not actually incurred expenditure on payment of rentin respect of the residential accommodation occupied by him.

Extent of HRA Exemption

  1. HRA Actually received
  2. 50% of the basic salary in case of employee reside in Metropolitan cities and 40% in any other case.
  3. Excess of Rent paid over 10% of basic salary.

Conditions for claiming deduction on Interest paid on home Loan

As per this section where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital shall be a allowed as deduction subject to the following conditions

  1. The maximum deduction shall be Rs 2 lakh in case of self occupied property and unlimited in case of Let out property –
  2. the property is acquired or constructed with capital borrowed on or after 01-April-1999, and
  3. such acquisition or construction is completedwithin five years from the end of the financial year in which the capital was borrowed.

Conditions for claiming deduction on repayment of Principal amount of Home Loan

We can claim tax benefits on home loan for principal repayment under section 80C of the Income-tax Act, 1961. But maximum deduction available under this section is 1.5 lakh.

Conclusion : After reading this article, we can conclude that Income tax act provides many exemption and deduction to home loan buyer.  Home loan buyer can take benefit of HRA, Interest paid on home loan and Principal repayment of home loan.


Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.

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