As per income tax laws, there isn’t any legal restrictions on claiming home loan benefits and HRA at the same time. The laws allow the tax payer to claim various benefits with regards to the house that is being occupied by the user, whether it is being owned by him or her or taken on rent.
Conditions related to claiming HRA
The tax benefit on HRA or house rent allowance is being available to a single person, that is the assesse who receives the HRA from the employer. This provision is not available to a self-employed person. For availing the benefit, the employee is expected to incur the expenditure on rent, with respect to a residential house property that is being occupied by the assesse. However, in case the accommodation is being partly or fully owned by the assesse, in such as a case the benefit of HRA is not available.
Further, the employee cannot let out his property to his employer and the employer in turn allots the same property to the employee to get some rent on this account. In such a case, HRA benefit cannot be claimed. Further, if the employee is a joint owner of a property and pays rent to other joint owners, in that case as well, HRA benefits cannot be claimed.
As per rule 2A of the income tax rules, the benefits of HRA shall be restricted to the lowest of the following three amounts: HRA actually received; Excess of rent paid over 10 per cent of basic salary; and 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.
The law, however, does not state that one cannot claim HRA benefit in case the tax payer owns a house and is already claiming tax benefits through housing loan.
Conditions related to claiming home loans
The major condition with regards to claiming benefits for home loans, under Section 80 C and Section 24(b), is that the person should be the owner of the house property. Such a tax benefit under Section 80C is only available for home loans that are being taken from specified persons for a residential unit. Interest benefits provided on taxations are available on both residential and commercial properties and on money borrowed from banks or from anyone else. Also, the interest on money that is being borrowed to let-out property is fully deductible too. The benefit on interest for a self-occupied house could be claimed up to INR 2 lakhs per year.
Conditions on claiming home loan and HRA benefits together
Although the law allows tax payer to have more than one house, the person can only opt for one such property as self-occupied and offer notional rent, while the other properties for tax. Using the same legal provision, one may state that the in addition to the rented house that is being occupied by the tax payer, he or she could also have more house property as self-occupied. In case the property owned by the tax payer is in the same city where he or she works, there will not be any issue. However, in case the property is in the city where the rented property is located, it may be logically difficult to establish that the tax payer is occupying both the houses at the same time.