Can I claim both HRA Benefit and Interest rebate on home loan?

I am staying in a rented accomodation in Bengaluru where I am paying a monthly rental of Rs.23000/-. I had also purchased an under construction property in 2013 (in Bengaluru again) for which I will be going for registration in Jan 2017. I have taken a home loan for Rs.50,00,000/- for the same. I plan to give it out on rent from Feb/Mar 2017 onwards. Is it possible for me to claim both HRA benefit and Interest Rebate on the home loan even though the property is not yet let out?

In case i let out the property in Feb/March 2017, can i then claim both, even though i will be showing rental income only for 1-2 months and claiming the interest benefit and HRA for the whole financial year?

What if i am unable to let out the property and it remains vacant till March. Will it be counted as Self Occupied Property? Can I claim both HRA and intertest rebate in this case?
Asked 3 months ago in Income Tax from Bengaluru, Karnataka
Hi
yes you can.
If you are living on rent and also paying a home loan, you can take advantage of claiming tax exemption for both house rent allowance (HRA) and repayment of home loan. All three—HRA, principal repayment and interest payment—can be claimed as exemption under separate sections of the Income-tax Act. However, there are certain conditions that you need to fulfill.
If you have bought a house with the help of a home loan and live in another house on rent, you can claim tax benefit for both. But if the house you bought and the house you live in are in the same city, you should have a genuine reason for not living in the house that you own. The reasons could be that the house you own is too far from your workplace, or the commute is very difficult.
You may need to provide these explanations to your employer, or the income tax authority in case there is a scrutiny of the details that you have provided.
Also, if you have recently bought a house in the city where you live in a rented property, and the new house is still under construction, then you can claim HRA benefits till such time as the new property is completed or not in a condition to live in .
The option of claiming both is also available if your own house is rented out and you stay in a rented property. In this case you will have to declare rental on your property as income and pay income tax on that. If your own house is not rented out but vacant, then you need to pay tax on a notional rent on this.
Yes, As your house is new constructed then you can show rental income of two to three months (jan , feb and march) and can claim whole interest amount under section 24 for rented house you can cliam whole interest amount ( limit of Rs 2 lakhs is only for self occupied house).

Vishakha Agarwal
CA, Bangalore
344 Answers
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Sir,

You can not claim HRA and Interest on housing loan for the same property. If you have not get possession fo the property than only you can get benefit of both HRA & Interest together, otherwise it is not possibel

Even if it is considered as property self occupied you can not claim benefit of HRA & Interest on property both together if both the properties are situated at same city.
Vishrut Rajesh Shah
CA, Ahmedabad
519 Answers
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Hi,

You are going to register the House in Jan 2017. So, I assume you will get Possession Certificate for the House in Jan 2017.

You can claim HRA till Dec 2016. After receiving Possession, you can claim HRA only if that House is let out before March 2017.

Regarding, Housing Loan, you can claim 80C Deduction once you get Possession of the House. If you do not let out the House by March 2017, it will be treated as Self-occupied. Interest up to Rs. 2 Lakh can be claimed as Deduction for Self-Occupied Property.
If you let out the House any time before March 2017, you can claim the entire amount of Interest Payable for FY 2016-17 on the Housing Loan.
Irrespective of whether the house is Self-occupied or let out, the pre-construction Interest paid till the previous FY i.e till FY 2015-16 can be claimed over 5 installments (Subject to the Limit of Rs. 2 Lakh in case the Property is Self-occupied)
Pradeep Bhat
CA, Bengaluru
235 Answers
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Dear Sir,

Yes, if you let out the property, then you can calik both HRA and interest rebate.

Yes, even if you let out the property in Feb/March, then also you will be able to calim interest rebate for the whole year.

Please feel free to call/revert in case of any doubts 

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
1120 Answers
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Yes if you prove that you are getting rent on the Property and living in a Rented House due to distance between the work place and rented accomodation is less and will save much time.

Yes you can claim both.

If it remains vacant then you need to take fair rental value the accomodation will fetch if it is rented.
Shyam Sunder Modani
CA, Hyderabad
1203 Answers
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Hi,

Option one is available only in case you own more than one House Property. From the scenario given by you, that option is technically not available to you. You have to go for Option 2. 

However, the best option is to Let out the House before 31-Mar-2017. The you can claim all the deductions for entire Year - HRA, Housing Loan Principal, Housing Loan Interest including pre-construction interest
Pradeep Bhat
CA, Bengaluru
235 Answers
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Dear Sir,

Please find answers :

a) Yes you can claim Pre - Construction interest for sure
b) I think you should go with the second option and than claim rent under section 80GGB which is additional deduction of Rs. 60,000/-  
Vishrut Rajesh Shah
CA, Ahmedabad
519 Answers
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Hello Sir,

You can very well claim both since the property will be a let out property and the rental income received from such a property will be liable to tax. In such a case you will have to pay tax on your rental income and claim interest and HRA benefit.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
1080 Answers
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Hi,

Pre-construction interest is to be allowed in 5 equal installments starting from the year in which the possession of the House is received. So, in your case it will be allowed from FY 2016-17 onwards.
In your case, if you cannot let-out the property by March 2017, then you will lose the benefit of 1/5th of the pre-construction Interest. However, remaining 4/5th amount can be claimed in the next four years if you let out the Property in FY 2017-18.

Regarding Joint Loan, Yes. pre-construction interest can be divided on the ratio of ownership of property
Pradeep Bhat
CA, Bengaluru
235 Answers
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Sir, if its new property purchased and total amount of property is below Rs. 50 Lacs than in current financial year there is additional interest benefit for first time home purchaser i.e. additional 50,000/- interest benefit. You can claim benefit of that.

In case of joint property it will be bifurcated in two parts and only 50% can be claimed in your name.
Vishrut Rajesh Shah
CA, Ahmedabad
519 Answers
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You can show notional rent and claim interest. 

Preconstruction interest will be taken as 1/5th every year

 
Shyam Sunder Modani
CA, Hyderabad
1203 Answers
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Hello Sir,

In a case where your current years income already crosses the bracket of Rs.2 Lacs then you may miss out on the component of pre-construction period interest.

Yes, the interest can be split between both the joint holders.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP

Rohit R Sharma
CA, Mumbai
1080 Answers
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