{"id":1163,"date":"2012-11-10T09:53:59","date_gmt":"2012-11-10T04:23:59","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=1163"},"modified":"2012-11-10T09:53:59","modified_gmt":"2012-11-10T04:23:59","slug":"you-can-claim-both-hra-and-interest-paid-on-home-loan-as-tax-deductions","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2012\/11\/10\/you-can-claim-both-hra-and-interest-paid-on-home-loan-as-tax-deductions\/","title":{"rendered":"You can claim both HRA and interest paid on home loan as tax deductions"},"content":{"rendered":"

\"\"<\/a>
\nVivek Kaul<\/strong>
\nI was at a house warming ceremony of a friend last week. My friend, instead of looking happy of having finally managed to buy his first house, had a worried look on his face.
\n\u201cSo what is bothering you?\u201d I asked. \u201cIs the wife being too jumpy as usual?\u201d
\n\u201cWell that part of life I have adjusted to. But I was worried about something else. Now that I have a\u00a0home\u00a0loan\u00a0EMI (equated monthly installment) to pay up, I need to ensure I don\u2019t get fired at work,\u201d he said, with a smirk on his face.
\n\u201cYeah your habit of putting things in a very matter of fact manner will have to be controlled,\u201d I said jovially.\u00a0 \u201cAnd do remember to say nice things to your boss now and then.\u201d\\
\n\u201cHmmm. But that\u2019s not what I am bothered about.\u201d
\n\u201cOh. Then?\u201d I asked.
\n\u201cSee till now I used to claim a deduction for my\u00a0HRA\u00a0(house\u00a0rent\u00a0allowance) against my taxable income.\u201d
\n\u201cYeah. So?\u201d
\n\u201cOh, now that I have taken a\u00a0home\u00a0loan\u00a0to buy a house, I will not be able to claim a deduction on my\u00a0HRA.\u201d
\n\u201cAnd why is that?\u201d
\n\u201cWell now I plan to claim a deduction on the interest portion of the\u00a0home\u00a0loan\u00a0that I have to repay. Given this, I will not be able to claim a deduction on my\u00a0HRA,\u201d he said with grave concern on his face.
\n\u201cAnd who told you that?\u201d|
\n\u201cOh my company accountant!\u201d
\n\u201cBut you don\u2019t plan to stay in this house that you have bought. Right?
\n\u201cYeah. My parents will stay here,\u201d he explained.
\n\u201cThen you can claim both the deductions.\u201d
\n\u201cOh. Can I?\u201d
\n\u201cYes, you can. As far as the Income Tax Act is concerned one does not influence the other.\u201d
\n\u201cWell, I thought as much. But my company accountant told me to specify the relevant section in the Income Tax Act which says that.\u201d
\n\u201cHah. That\u2019s the problem with these accountants. They are too bookish and cannot interpret anything. The next time you meet him ask him which section in the Income Tax Act specifies that if you are claiming interest that you pay on your\u00a0home\u00a0loan\u00a0as a deduction you cannot claim\u00a0HRA\u00a0as a deduction as well? In the language of the Income Tax Act silence signifies approval,\u201d I explained.
\n\u201cSilence signifies approval?\u201d he asked. \u201cWhat do you mean by that?\u201d
\n\u201cLet me give you an example to explain this. You claim deductions under Section 80C\u00a0 for investments in employees provident fund, public provident fund, tax saving mutual funds, life insurance and so on. You also claim a deduction for payment of premium towards medical insurance under Section 80D. Both these deductions are separately claimed but does any section of the Income Tax Act\u00a0expressly say so?\u201d
\n\u201cNow that you put it this way, it makes perfect sense.\u201d
\n\u201cAs far as\u00a0HRA\u00a0is concerned, the deduction is covered under Section 10 (13A) of the Income Tax Act. It clearly specifies that the tax payer should be paying\u00a0rent\u00a0for a house he does not own. As long as this condition is met a taxpayer can claim a deduction for his\u00a0HRA.\u201d
\n\u201cOh. I did not know that.\u201d
\n\u201cSo as long as the rented place is not owned by the taxpayer, which by its very definition cannot, he can claim a deduction as specified. This or any other section does not specify that this deduction cannot be claimed in case the tax payer owns any other property.\u201d\u201cSo I can claim both the deductions?\u201d
\n\u2018Yes you can claim a deduction of a maximum of Rs 1.5 lakh for the interest that you pay on your\u00a0home\u00a0loan\u00a0and you can claim a deduction for your\u00a0HRA\u00a0as well,\u201d I explained.
\n\u201cBut I had another doubts here?\u201d he asked.
\n\u201cFire away.\u201d
\n\u201cI was reading somewhere that in order claim the interest paid on the home loan as a deduction the home has to be self occupied. Now if I live in a rented accommodation how can the home \u00a0I have bought on a home loan be self occupied?\u201d
\n\u201cVery good question. How can the home you have bought be self occupied when you are living in a rented accommodation?\u201d
\n\u201cYes. That\u2019s my question,\u201d he replied. \u201cI can\u2019t be living at two places at the same time.\u201d
\n\u201cFor this we need to look at Section 23(2) of the Income Tax Act. The term self occupied property includes property that cannot be occupied by the owner due to his business or profession or employment, being carried on at any other place in a building that he does not own. What this means is that a self occupied property should be meant for your occupation and you need not be necessarily living there,\u201d I explained.
\n\u201cHmmm. Nothing is ever like it seems!\u201d he exclaimed.
\n\u201cEspecially when it comes to the Income Tax Act.\u201d
\n\u201cAnd now that we have got into some detail, how does the\u00a0HRA\u00a0deduction work?\u201d he asked.
\n\u201cAs per section\u00a010(13A) of the Income Tax Act, the deduction is restricted to a minimum of: a) The actual\u00a0HRA\u00a0that you get b) the actual\u00a0rent\u00a0paid less 10% of your salary, where salary includes the basic salary plus the dearness allowance c) 50% of the salary if the rented house is situated at Mumbai, Chennai, Kolkata and Delhi and 40% of the salary in any other case. The\u00a0HRA\u00a0that an individual receives over and above this is included as a part of the taxable income.\u201d
\n\u201cSo how would it work in my case? You know my\u00a0HRA\u00a0is Rs 30,000 per month or Rs 3.6. lakh per year, and I pay a\u00a0rent\u00a0of Rs 22,000 per month.\u201d
\n\u201cWhat is your basic salary?\u201d
\n\u201cMy basic is Rs 60,000 per month.\u201d
\nI picked up a piece of paper that was lying around and got cracking on the math. \u201cThe actual\u00a0HRA\u00a0you get is Rs 30,000 per month. The actual\u00a0rent paid less 10% of your salary works out to Rs 16,000 (Rs 22,000 \u2013 10% of Rs 60,000). And 50% of your basic salary works out to Rs 30,000. As you can see the minimum amount works out to Rs 16,000 per month or Rs 1.92 lakh per year. And that is the amount that you can claim as a deduction from your taxable income. The remaining portion of your\u00a0HRA\u00a0i.e. Rs 1.68 lakh (Rs 3.6 lakh \u2013 Rs 1.92 lakh) will be added to your income for the year and taxed at the marginal rate of tax you fall into,\u201d came a long wielding explanation from my end.
\n\u201cSo that explains it I guess. You have taken a huge load of my shoulders,\u201d my friend said.
\n\u201cYes. Now let\u2019s have some\u00a0ras malai\u00a0<\/i>and celebrate.\u201d
\nThe article originally appeared on www.firstpost.com on November 10, 2012.\u00a0http:\/\/www.firstpost.com\/investing\/you-can-claim-both-hra-and-interest-paid-on-home-loan-as-tax-deductions-521391.html<\/a>
\n(Vivek Kaul is a writer. He can be reached at\u00a0vivek.kaul@gmail.com<\/a>)<\/p>\n","protected":false},"excerpt":{"rendered":"

Vivek Kaul I was at a house warming ceremony of a friend last week. My friend, instead of looking happy of having finally managed to buy his first house, had a worried look on his face. \u201cSo what is bothering you?\u201d I asked. \u201cIs the wife being too jumpy as usual?\u201d \u201cWell that part of … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[33,58],"tags":[1624,1778],"qubely_featured_image_url":null,"qubely_author":{"display_name":"Vivek Kaul","author_link":"https:\/\/vivekkaul.com\/author\/vivekkaul\/"},"qubely_comment":0,"qubely_category":"Firstpost<\/a> Personal Finance<\/a>","qubely_excerpt":"Vivek Kaul I was at a house warming ceremony of a friend last week. My friend, instead of looking happy of having finally managed to buy his first house, had a worried look on his face. \u201cSo what is bothering you?\u201d I asked. \u201cIs the wife being too jumpy as usual?\u201d \u201cWell that part of…","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/1163"}],"collection":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/comments?post=1163"}],"version-history":[{"count":0,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/1163\/revisions"}],"wp:attachment":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/media?parent=1163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/categories?post=1163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/tags?post=1163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}