Taxability of HRA and interest on housing loan

There may be situations where you have taken loan for construction or purchase of house and you are residing in a rented property (for official purpose), paying rent and at the same time receiving House Rent Allowance.

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Then, how much of HRA and income from house property will be taxable?

You can claim both HRA and Interest on housing loan even both the properties are in the same place.HRA can be claimed even, if your residential property is let out, or self-occupied or it remain vacant due to employment/business/profession carried on at any other place and he has to reside at other place in a house not belonging to him. it should be noted that employee should not be the owner of the property, for which he is paying rent [10(13A)].

Interest on house property can be calculated in two ways.

24(b) of the Income Tax Act specified that, if your residential property is self occupied, you can claim deduction up to Rs 1, 50,000.

If the residential property is let out, then there will be no limit for deduction-full amount of interest can be deducted.

To conclude:

1) In order to treat your residential house as self occupied, you should not let out it. Then, you can deduct interest up to Rs 30,000 or Rs 1, 50,000 as the case may be.
2) If you let out your residential house, then you can deduct the interest without any limit.
You can claim HRA [10(13A)] under both situations.

 

Find out how to compute taxable HRA?

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