IT exemption for HRA while deducting interest on Housing Loan

Whether Income tax exemption on HRA is available to me while I am claiming deduction in respect of home loan interest?

This doubt would arise in the minds of all salaried employees when they pay rent for their present dwelling yet they have a own house either at the place of work or at the station outside their present place or working.

We feel that both of these benefits will be available if income tax provisions relating both of these benefits did not exclude the other.

Availability of HRA exemption when interest is deducted:

To answer this question, we need to look at Section 10 (13A) of Income tax Act.

The exemption for HRA is covered under Section 10 (13A).   The foremost condition for availing income tax exemption is the person claiming exemption should have paid rent for the house in which he lived in the assessment year.

The provision which allows exemption for HRA has no condition regarding ownership any house property.

However, if a person who stays in his own property and also gets an HRA from his employer, he will not be eligible for income tax exemption on HRA.

Availability of interest deduction when HRA exemption is availed:

There is no provision in the Section 22 to 27 of Income tax act (which relate to inclusion of income or loss on house property in the salary income), for restricting the exemption of HRA.

Also, these provisions did not impose any condition to the effect that the deduction of interest will not be available when the property is not self occupied. 

The bottom-line is when the house property of the person whose income is assessed is not self occupied and rent is incurred for the stay of the same person, he/she can avail Income tax exemption on HRA while he/she deducts the interest paid for the house loan obtained for the said house property

Check this GConnect calculator meant for calculating Income or loss on House property

Check this article to calculate actual HRA exemption

Calculate your income tax using GConnect Income Tax Calculator 2011-12 (Assessment year 2012-13)

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