Saturday, August 26, 2017

HRA Exemption, Rent Deduction and Tax Benefits for Home Loan in India

Author: Sachin Gupta | Find me on Twitter

Many a times, we are all confused with tax calculations on House Rent Allowance (HRA) and tax benefits on home loan, etc. Believe it or not, planning your HRA carefully can go a long way in your financial planning and therefore studying and understanding the various guidelines related to HRA is paramount for a salaried class and a business person.


  • HRA Exemption:

According to section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules, least of following three is exempt from tax:

  1. Actual HRA received 
  2. Rent paid in excess of 10% of salary (Basic + DA) 
  3. 40% of salary (50% if residing in a metro i.e., New Delhi, Kolkata, Chennai or Mumbai) Salary for the above purpose means BASIC + DA.


Let’s take an example. 
Suppose that you’re residing in Mumbai and paying a rent of Rs 20,000 per month and that your salary package comprises of the following: 
  1. Basic — Rs. 50,000 per month
  2. DA — Nil 
  3. HRA — Rs. 20,000 per month (40% of basic)

Now, the exempted amount of HRA will be least of the following three figures: 
  1. HRA received i.e., Rs. 20,000 
  2. Rent above 10% of basic i.e., Rs. 15,000 (Rs. 20,000 – Rs. 5,000) 
  3. 50% of basic i.e., Rs. 25,000
The least of the three is Rs 15,000; therefore, in this particular case you’re entitled for HRA tax exemption of Rs. 15,000 p.m. (per month) out of total HRA received of Rs. 20,000 per month.


In other words, net taxable portion of the HRA works out to be Rs 60000/- per year. 
net taxable portion of the HRA = Total HRA received per year – HRA Tax exempt per year
                                                    = (HRA received per year Rs 240000/-) - (HRA tax exempt per year Rs 180000/-)
                                                   =Rs. 60000 per year


There are four variables in HRA tax calculations namely, salary (i.e. basic pay plus DA), HRA received, rent paid and the city of residence (whether metro or non-metro). In case all of the four elements remain same throughout the year, the HRA tax exemption calculation is to be done on ‘annual’ basis. On the other hand, if there is a change in any of the variable during the year then HRA tax exemption calculation is to be done on monthly basis.

In case the place/city of residence and place/city of working is different, for the purpose of HRA calculation, place of residence will be considered and not place of working. Suppose that you’re working in a factory or a company located in Meerut (near New Delhi) while residing in New Delhi. So, for the purpose of HRA, your maximum entitlement for tax purpose will be 50% of the basic instead of 40% because for metros HRA tax entitlement is 50% and for non-metros it is 40%.

If the employer refuses to allow the HRA tax benefit, then in that case just claim it while filing your return of income and get the refund of excess TDS deducted from your salary. Further with effect from AY 2014-15 a person claiming HRA of more than INR 100000/- will have to submit the PAN of the landlord to claim the exemption. 

Both the working spouses can claim HRA tax benefit separately, if both of them are paying rent and landlord issues either two separate rent receipts or only one receipt specifying the amount or proportion paid by each, then both husband and wife are entitled for HRA exemption according to the amount of rent paid. 

One can avail tax benefit of HRA if the person is living in the house of his/her parents. In such a case, one will be entitled for HRA tax exemption, but the owner of the house who may be the father/mother is assessable for the rental income derived from the house, provided such transaction should be genuine & not with an intention to evade tax. However tax benefit of HRA will not be available if one is living in the house of his/her spouse as no commercial transactions can occur between Husband & wife.



  • Deduction for Rent Paid

A self-employed person can claim tax benefit for the rent paid for his residence and can claim a deduction under section 80GG of the income tax act. As the self-employed person doesn't receive any salary, so there is no HRA and consequently question of HRA exemption – under section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules –doesn't arise.


As far as home loans are concerned following tax benefits are available to the tax payer:
  1. Tax benefit on principal repayment under Section 80C – Repayment of Housing Loan subject to maximum limit of INR 100000/-. (Maximum deduction under section 80C is INR 100000/-).
  2. Tax benefit on interest payment under Section 24(a) & (b). For self occupied property INR 150000/- and for let out property or deemed to be let out property there is no monetary limit to for interest payments.

  • Claiming both HRA and Home Loan Tax benefit
You can Claim both HRA and Home Loan Tax benefit provided you have a house in one city for which you have taken a home loan and you reside in another city due to work or similar reasons, then you are eligible to avail all the benefits including HRA, tax benefits on principal repayment of home loan and tax benefit on interest payments of home loan. But, if your house is vacant then you still have to pay notional rent income.

In this case the following situations will arise:

Your own house remains unoccupied while you stay in any other accommodation due to employment/business/profession reasons.  You may stay at a place – it may be a different city or a different location within the same city - different from the place where your own house is situated.  

  • Rented accommodation – You are paying rent:  In this case, you can claim HRA tax exemption while your house will lose the status of self-occupied property and will be treated as deemed to be let out, and thus its notional rental income will be taxable in your hands. However you'll get all the housing loan tax benefits i.e. both interest deduction u/s 24(b) and principal repayment under section 80C.

  • Non-rented accommodation i.e., you're not paying rent as the rent is not being paid, the question of HRA tax exemption does not arise. However, your house will be treated as self-occupied and you'll get the housing loan tax concessions i.e. interest deduction under section 24 and deduction for principal repayment under section 80C. 


In a nutshell, if you have a house, either stay in it or rent it out. Don't leave it vacant else notional rental income of your house (even if it is the only house you own) becomes taxable in your hands although you continue to get the interest deduction on housing loan u/s 24(b) and deduction for principal repayment of loan u/s 80C. Furthermore, as regards the HRA, you will be getting the tax exemption under section 10(13A) so long as you are staying in a rented accommodation and actually making the rent payment, irrespective of whether you are having your own house(s) or not.




Have any Questions?

69 comments:

  1. Hi I like Your Blog this very Informative Blog, if you have Interest in Property You can also like Ramprastha Primera Residential Apartment which is Located at Gurgaon.

    ReplyDelete
  2. Hi dear
    very nice blog home loans and thanx for suggest me
    if u wants to know about home loans then visit Home Loans in Delhi

    ReplyDelete

  3. Nice post with great details. I really appreciate your info. Thanks for sharing Flat Rent in Kolkata - South And I get more information for here. In future I hope you will provide same related blog.

    ReplyDelete
  4. Find real estate, homes for rent, properties for rent, pg, rooms and neighborhood information and much more on Rentalwala.com .

    ReplyDelete
  5. Interesting blog. This is one of my favorite blog also I want you to update more post like this. Thanks for sharing this article.
    Home loans in Chennai

    ReplyDelete
  6. This comment has been removed by the author.

    ReplyDelete
  7. Excellent blog!. I was looking for Furniture on Rent and I landed your website through google search. I found your blog very interesting.

    ReplyDelete
  8. My friend is seeking for Home Loan in Lucknow for buying a house of his dream. But his monthly income is not more than 6000 rupees. Can you suggest what he should do?

    ReplyDelete
  9. This comment has been removed by the author.

    ReplyDelete
  10. This comment has been removed by the author.

    ReplyDelete
  11. This comment has been removed by the author.

    ReplyDelete
  12. UTC Project -Code 60 providing 1 and 2 BHK Studio Apartments, 2 and 3 BHK Studio Apartments in Noida Extension, Best Studio Apartment in Delhi NCR, Best Luxury Studio Apartment Noida

    ReplyDelete
  13. Buying property in Bangalore is a good investment option.The best benefit of investing in residential project in Bangalore is the choice you get here.
    Plots in Electronic City Bangalore |Villa Plots near Anekal

    ReplyDelete
  14. Owning a home is a lifetime dream for many people and also a long-term investment.Biggest purchase for most of the people ever make is buying a home.
    Villas in Hoskote Near Bangalore|Plots in Hoskote Near Bangalore

    ReplyDelete
  15. If you are planning to take the high budget home or premium property, but you are short with the money, so better to take the home loan as it allow you to repay the loan amount in upcoming years which can range from 10 to 15 years based on the loan amount and repayment capacity. These days’ middle class and low income groups are taking a lot of loan to get the home ownership.

    ReplyDelete
  16. Thanks for posting

    This appendix will focus upon some of the indications that would warrant your business in getting an Office space on rent in karkardooma, Delhi

    Office space on rent in karkardooma

    Office space on rent in Patparganj Industrial area, Delhi

    ReplyDelete
  17. Hey Thanks for sharing this informative blog, it seems very helpful. i was looking for same kind of content about Home Loans

    ReplyDelete
  18. Hi , I love your blog, it’s packed with contents. It gives a wealth of information on various topics.
    home loan tax benefit

    ReplyDelete
  19. This comment has been removed by the author.

    ReplyDelete
  20. Thus the city has brought in a 1% tax for almost all homes that are not primary residences and are not rented. best rental management companies

    ReplyDelete
  21. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post.
    rafleys.com

    ReplyDelete
  22. This comment has been removed by the author.

    ReplyDelete
  23. It's a great article which has shared over here. Thank you for sharing it.
    Residential Property in Jaipur

    ReplyDelete
  24. Thanks for Sharing such a Valuable Information,
    If you need home loan India and apply home loan online with deal4bank

    ReplyDelete
  25. I bought my dream home at TSG. Most trusted builders and developers of Mumbai are real estate in mumbai

    ReplyDelete
  26. Hi I like Your Blog this very Informative Blog, if you have Interest in Property To buy property in Jaipur check Leading Builders and Developers in Jaipur. Shree Ram Group

    ReplyDelete
  27. Really Nice Blog Thanks for Sharing, Mahindra Windchimes apartments from Mahindra Lifespaces arranged at Bannerghatta Main Road Arekere Bangalore. Buy, Sell, Rent & List real estate properties in Bangalore.
    Know More Visit Below Links.
    mahindra windchimes
    mahindra lifespaces windchimes
    www.windchimesbymahindra.in

    ReplyDelete
  28. Hi we like Your Blog this very Informative Nice Article. If you are Intrested in Best Home Loans in Hyderabad.

    ReplyDelete
  29. Nice blog. very informative content. keep writing such stuff.
    visit to book flats and apartments in jaipur at best prices residential property at best prices in jaipur

    ReplyDelete
  30. What are the best home loan options available in India, See options to get 50 Lacks Hurry up!
    Read more - https://goo.gl/NYhAP8

    ReplyDelete
  31. Many a times, we are all confused with tax calculations on House Rent Allowance (HRA) and tax benefits on home loan, etc. Believe it or not, planning your HRA carefully can go a long way in your financial planning and therefore studying and understanding the various guidelines related to HRA is paramount for a salaried class and a business person.

    ---

    mua nhà đất dưới 2 tỷ tại hà nội

    ReplyDelete
  32. Dabbl is a top sanitary ware manufacturing and distributers company. We provide many types of bathroom shower products such as Quadrant, Walk in, Corner, Glass, Custom, Frameless Shower Enclosures, Shower Cubicles, Custom, Sliding Glass Shower Doors, Shower Screen, Shower Trays, Bathtub and many more email at export1@dabbl.de more information visit now Shower Enclosures, Shower Doors, Bathtub

    ReplyDelete
  33. Nice blog..! I really loved reading through this article... Thanks for sharing such an amazing post with us and keep blogging...
    residential plots for sale near kadthal
    plots for sale near mucherla pharmacity
    residential plots sale srisailam highway

    ReplyDelete
  34. Dabbl is a large shower and sanitary ware manufacturing and distributers company, our company provide many types of shower products like corner shower enclosures, walk in shower enclosures, quadrant shower enclosures, frameless shower enclosures, shower rooms, shower screen, shower stalls, shower cabins, custom, sliding glass shower doors etc email export1@dabbl.de more information visit here Shower Enclosures, Glass Shower Doors, Cubicles, Screen

    ReplyDelete
  35. Intresting post about real estate services. Please keep updating.
    Apartments for sale in Bangalore Whitefield

    ReplyDelete
  36. Best Shower Enclosures – wide range of bathroom shower enclosures, doors etc at best price. Select best quality and design of shower cubicles, bathroom shower enclosures, screen, stall etc. kindly send own requirement at export4@dabbl.de visit here Shower Enclosure, Cubicles, Door

    ReplyDelete
  37. It's Great Article Cache Chief has recently collaborated with Shree Radha Aangan, a township project that spreads across 55 acres of land. Shree Radha Aangan is a residential project started with a vision of providing housing away from the hectic lifestyle

    ReplyDelete
  38. Great Blog,
    Thanks for the info..


    Thanks a lot author for bringing such useful information into our knowledge.

    Property in lucknow , 2BHK property in lucknow , property in lucknow for sale , property in lucknow for rent , .

    ReplyDelete
  39. I came across through your blog. I found the valuable information about the real estate. Thanks for sharing.
    3 BHK Flats in T Nagar

    ReplyDelete
  40. Thank you for sharing this information. It has helped me to know more about
    home decorating mistakes

    ReplyDelete
  41. Shreyas Enterprises home loans in Vizag

    Shreyas Enterprises Vizag is engaged in offering Home Loans to the clients In Visakhapatnam. A crew of experienced personnels
    works with enthusiasm for rendering best services

    ReplyDelete
  42. Hey thanks for this amazing post. Would love to read more of such blogs. You can also have a look at Home Loan Tax Benefit for more information.

    ReplyDelete
  43. Thanks for providing this informative post. Your blog is very nice and we are inspired of your blog.
    https://www.bharattaxi.com

    ReplyDelete
  44. Thank you for sharing this information it has helped me to know more about home interest rates

    ReplyDelete
  45. Thank you for sharing this information. It has helped me to know more about
    home loan offers

    ReplyDelete
  46. Thank you for sharing this information. It has helped me to know more about
    home loan providers

    ReplyDelete