Housing Loan & HRA Tax benefits can be claimed simultaneously

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Housing Loan & HRA Tax benefits can be claimed simultaneously

Taxpayers staying in a rented premise are eligible for tax benefit. Salaried person receiving House Rent Allowance (HRA)  from employer are eligible for deduction u/s 10(13A) whereas other taxpayers are eligible for deduction u/s 80GG. There is a doubt in the minds of taxpayers as to whether deduction u/s 10(13A) or 80GG and tax benefits attached to home loan can be availed simultaneously. Let us see.

Deduction towards HRA:

Any salaried taxpayer living in a rented premise & receiving HRA from his employer is eligible for exemption u/s 10(13A) read with Rule 2A. The amount of exemption to meet expenditure on payment of rent shall be the least of the following:
a] Actual amount of HRA received;
b] Actual expenditure incurred towards payment of rent in excess of 10% of the salary; or
c] Where such accommodation is situated in Mumbai, Kolkata, Delhi or Chennai, 50% of the salary due to the employee for the relevant period; or Where such accommodation is situated in any other places, 40% of the salary
[For this purpose, “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites].

To claim deduction u/s 10(13A), employee have to submit the rent receipts to the employer every year alongwith Form No. 12BB. If annual rent paid by the employee exceeds Rs 1,00,000/- per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee. Rent agreement is not a pre-condition for allowability of deduction towards HRA.

In short, deduction towards HRA is available to a salaried taxpayer if the following conditions are satisfied:

  1. Employee is in receipt of HRA from an employer.
  2. Employee is paying rent for the accommodation occupied by him.
  3. Accommodation for which the rent is paid is not owned by the employee.
    [In cases of jointly owned residential houses, employee cannot pay rent to the other co owner for claiming HRA benefit].

Deduction towards Rent Payment U/s 80GG:

Taxpayers, whether salaried or businessmen, who don’t own a house and are staying in a rented premise are eligible for deduction u/s 80GG towards rent Payment. The conditions for claiming deductions are as under:-
a] Individual has to prepare a declaration in Form No. 10BA.
b] Individual or his minor child, spouse or HUF of which he is a member, should not be owner of a house at the place where he ordinarily resides or performs his duties. If taxpayer owns a residential property at a place other than the place referred above then the concession of self occupied house property should not have been claimed in respect of such house property.
If above conditions are satisfied, lower of the following shall be admissible as deduction:
(i) house rent paid in excess of 10% of “Total Income”; or
(ii) Amount at 25% of “total income”; or
(iii) Rs. 5,000/- per month.

In case of salaried assessee who is in receipt of HRA from the employer, no deduction u/s 80GG is admissible as they can claim deduction u/s 10(13A) of the Income Tax Act-1961.

Simultaneous claim of tax benefit towards HRA & Housing Loan:

Deduction u/s 80GG is not available if Individual or his minor child, spouse or HUF of which he is a member, is a owner of a house at the place where he ordinarily resides or performs his duties. However, legal provision in respect of HRA is different. It nowhere stipulates that the tax benefit cannot be claimed if the taxpayer owns any house. Even if the house is located in the same city where taxpayer is residing or on which home loan benefit is also availed then also the taxpayer can claim the deduction towards HRA U/s 10(13A). Even if taxpayer’s own property is vacant or occupied by parents, brother etc then also the deduction u/s 10(13A) would be admissible. So long as salaried taxpayer is staying in a rented premise, deduction towards HRA received would be admissible.

 [Readers may forward their feedback & queries at nareshjakhotia@gmail.com Other articles & response to queries are available at www.theTAXtalk.com ]

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