What are Home Loan Tax Benefits?
Home Loan tax benefits are tax exemptions that a homeowner can get on the interest paid on their mortgage. The primary goal of these exemptions is to provide financial relief to homeowners and encourage them to invest in real estate. The following are the tax benefits available to Home Loan borrowers:
1. Tax Deduction for Home Loan Interest:
Under Section 24 of the Income Tax Act of 1961, borrowers can claim a Home Loan tax exemption of up to Rs.2 Lakh on the interest paid on their Home Loan.
2. Tax Deduction for Home Loan Principal Repayment:
Home Loan borrowers can claim a tax deduction of up to Rs.1.5 Lakh on the principal repayment of their Home Loan under Section 80C of the Income Tax Act of 1961.
3. Tax Benefits on a Second Home Loan:
If a person takes out a second Home Loan to buy a new home, they can claim tax benefits on the second Home Loan as well as the first Home Loan.
What is House Rent Allowance (HRA)?
House Rent Allowance (HRA) is a type of compensation given to employees by their employers to help them cover the cost of renting a home. The HRA is a taxable component of an employee's salary, and the amount of HRA received is used to calculate taxable income.
The HRA is calculated as a percentage of an employee's basic salary, depending on where they live. The percentage of HRA varies according to location and cost of living. HRA is a taxable benefit, and the employee must pay tax on the amount received. Employees can, however, claim tax exemptions on the HRA received if they provide proof of rent paid to the relevant tax authorities.
It should be noted that the HRA only applies to salaried employees and not to self-employed individuals. Furthermore, the HRA is only applicable if the employee rents rather than owns a home.
Section 10(13A) of the Income Tax Act of 1961 determines the House Rent Allowance (HRA). According to this section, an employee's HRA is tax-free to the extent of the least of the following:
- The employee's actual HRA.
- The rent paid less 10% of the basic salary.
- 50% of the basic salary for those living in metropolitan cities (Mumbai, Delhi, Kolkata, and Chennai) and 40% for those living in other cities.
The purpose of this section is to provide assistance to employees who are required to live in rented housing as part of their job and face significant rent expenses. By allowing tax breaks on HRA, the government encourages employees to live in rented housing while alleviating the financial burden of high rental costs.
Is it Possible to Claim Home Loan and HRA Tax Benefits Together?
Yes, it is possible to claim both Home Loan tax benefits and HRA tax benefits. A person who pays a Home Loan and receives House Rent Allowance (HRA) as part of their salary can claim tax benefits on both.
Individuals can claim a tax deduction on Home Loan interest paid up to Rs.2 Lakh under Section 24 of the Indian Income Tax Act, 1961. In addition, the employee's HRA is tax-free to the extent specified in Section 10(13A) of the Income Tax Act of 1961.
Scenarios in Which You Can Claim Both Home Loan and HRA Tax Benefits
1.You own a home in one city but live on rent in another city
If a person owns a home in one city but lives in another, they can still claim tax benefits on both the Home Loan and the House Rent Allowance (HRA) they receive as part of their salary.
2.You own a home in one city and live on rent in the same city
If a person owns a home in one city but lives in another, they can still claim tax benefits on both the Home Loan and the House Rent Allowance (HRA) received as part of their salary. However, if the individual's own home is in the same city as their rented accommodation, the HRA exemption may be limited because the individual is not required to pay rent for their own home. In such cases, the HRA exemption is limited to the bare necessities:
-
The total amount of HRA received
-
Those living in metro cities (Delhi, Mumbai, Kolkata, and Chennai) will receive 50% of the basic salary, while those living in non-metro cities will receive 40%.
3.You rent out your own home and live in the same city
If a person owns a home in one city and rents it out, but lives in another, they can still claim tax benefits on both the Home Loan and the House Rent Allowance (HRA) received as part of their salary.
4.Your home is under construction and you live on rent elsewhere
If a person has a home under construction but lives in a rented house elsewhere, they can still claim tax benefits on the Home Loan and the House Rent Allowance (HRA) that they receive as part of their salary. This deduction is available for self-occupied properties, and in the case of a home under construction, the individual can claim the deduction once the construction is finished and the property is ready for occupancy.
Also Read: 10 Useful Income Tax Deductions
What is the Total Amount of Deduction One Can Claim Under a Home Loan and HRA?
The total amount of benefit that an individual can claim from HRA and Home Loan tax deductions is subject to the provisions of the Income Tax Act of 1961 and other applicable tax laws. The exact amount of benefit will be determined by a number of factors, including the individual's salary, the amount of interest paid on the Home Loan, the rent paid, the location of the rented accommodation, and the type of property.
Example of Tax Deduction Calculation
Here’s an example of how to calculate the tax deduction.
Assume an individual earns Rs.10 Lakh per year and pays Rs.2 Lakh in rent. Additionally, the individual has a Home Loan with an annual interest payment of Rs.2 Lakh. The individual can claim a tax deduction of Rs.2 Lakh (the maximum allowed under Section 24 of the Income Tax Act, 1961) on the interest paid on the Home Loan. The HRA exemption is calculated as the lesser of the following:
-
Individuals living in metropolitan cities will receive 50% of their basic salary (Rs.5 Lakh)
-
Individuals living in non-metropolitan cities are entitled to 40% of their basic salary (Rs.4 Lakh)
-
HRA received in full (Rs.2 Lakh)
So, the total amount of tax deductions that the individual can claim is Rs.2 Lakh (for the Home Loan interest) + Rs.2 Lakh (for the total HRA exemption) = Individuals can claim a combined tax benefit of Rs.4 Lakh.
FAQs
You cannot claim an exemption on HRA if you are staying in your own House. However, if you own a house in one city and live on rent in another, you can certainly claim. In case where your house and rented accommodation are both in the same city, you can still claim HRA provided your place of work is far from home and you have to stay in a rented accommodation near your workplace.
Yes, you can claim both.
Yes, it is mandatory to provide the PAN details of your landlord.
The maximum HRA you can claim is the minimum of the following:
-
Actual HRA received
-
Rent paid annually reduced by 10% of salary
-
50% of your basic salary (if you live in a metro city)
-
40% of your basic salary (if you live in a non-metro city)
-
You can claim HRA tax exemption and Home Loan tax deduction together if you meet certain conditions.
DISCLAIMER:
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.
Trending Articles
[N][T][T][N][T]
6 Smart Tips to Increase Your Home Loan Eligibility2024-06-27 | 4 min
[N][T][T][N][T]
5 Essential Things You Need for a Home Loan Approval2024-05-08 | 3 min
[N][T][T][N][T]
7 Benefits of Taking a Home Loan in India2024-06-19 | 3 min
[N][T][T][N][T]
A Complete Guide to Check Credit Score Easily for Free2024-05-02 | 3 min
cibil Cibil
[N][T][T][N][T]
What's Considered a Healthy Credit Mix?2024-06-11 | 3 min
home+loan Home Loan
[N][T][T][N][T]
All About Home Loan Balance Transfers2024-06-04 | 4 mins
cibil Cibil
[N][T][T][N][T]
What Distinguishes CIBIL Score from CIBIL Report?2024-04-11 | 3 min
home+loan Home Loan
[N][T][T][N][T]
What Is Home Loan Eligibility and How Is It Calculated2024-07-11 | 6 min
cibil Cibil
[N][T][T][N][T]
How Does Being A Loan Guarantor Affect Your Credit Score?2023-03-23 | 4 min
cibil Cibil
[N][T][T][N][T]
What is Credit Mix and How to Boost Your Credit Score?2023-03-27 | 7 min
cibil Cibil
[N][T][T][N][T]
Will a Loan Settlement Ruin My CIBIL Score?2023-03-21 | 4 min
cibil Cibil
[N][T][T][N][T]
How can I Remove Loan Inquiry from CIBIL Credit Report2024-01-22 | 5 min
cibil Cibil
[N][T][T][N][T]
Does CIBIL Score Affect Loan Against Property Eligibility?2023-02-15 | 7 min
cibil Cibil
[N][T][T][N][T]
How To Improve CIBIL Score After A Payment Default?2023-03-29 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Everything You Need to Know About Top-up Loans on a Home Loan2024-04-09 | 6 min
cibil Cibil
[N][T][T][N][T]
What Is a Good Credit Score for a Home Loan?2022-12-28 | 5 min
cibil Cibil
[N][T][T][N][T]
Things That Can Go Wrong with Your CIBIL Report2023-03-15 | 5 min
cibil Cibil
[N][T][T][N][T]
How a Good CIBIL Score Can Help You Celebrate the Festive Season Better2024-03-19 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Home Loan and Personal Loan: Which is better?2024-03-04 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Better Interest Rate on Your Home Loan2024-01-04 | 5 min
cibil Cibil
[N][T][T][N][T]
How Can Your CIBIL Score Help in Negotiating Better Home Loan Deals2023-05-18 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Get a Home Loan Without Visiting Branch: A Step-by-Step Guide2024-03-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Complete Guide to Securing a Attractive Interest on Home Loans2024-01-23 | 3 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Understanding the Fees and Charges on Your Loan Against Property2024-02-16 | 8 min
cibil Cibil
[N][T][T][N][T]
Here’s What You Can Do to Improve Your CIBIL Score2023-03-16 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Refinancing: What, Why, and Things to Remember2024-06-17 | 5 Min
tax Tax
[N][T][T][N][T]
How to Avail of Tax Benefits on a Loan Against Property2024-06-13 | 5 Min
cibil Cibil
[N][T][T][N][T]
Top 10 Reasons For Low CIBIL Score & How To Improve It2024-03-01 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Great Ways Women Can Benefit from Taking a Housing Loan2024-01-16 | 5 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Top Benefits of a Loan Against Property Over Collateral-Free Loans2024-01-09 | 4 min
cibil Cibil
[N][T][T][N][T]
Five Reasons Why a Bad Credit Score Could Lead to Loan Rejection2024-01-22 | 5 min
cibil Cibil
[N][T][T][N][T]
How Does Your Digital Footprint Affect Your CIBIL Score?2024-03-20 | 5 min
cibil Cibil
[N][T][T][N][T]
How Can I Get My ECN Number in CIBIL?2024-01-09 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Types of Home Loan Charges2024-01-22 | 3 Min
home+loan Home Loan
[N][T][T][N][T]
What is Foreclosing a Home Loan? These are Some of the Do’s and Don’ts2023-12-20 | 6 min
tax Tax
[N][T][T][N][T]
10 Useful Income Tax Deductions for FY 2022-232024-02-21 | 6 min
home+loan Home Loan
[N][T][T][N][T]
All You Need to Know About Home Loans2023-01-19 | 5 min
cibil Cibil
[N][T][T][N][T]
Ways You Can Improve your Credit Score for a Small Business2023-03-01 | 5 min
tax Tax
[N][T][T][N][T]
5 Tax Savings and Other Advantages You Can Get When You Apply for Home Loans2024-02-14 | 6 min
cibil Cibil
[N][T][T][N][T]
Reasons Why Your CIBIL Score Is Going Down2024-04-10 | 4 min
[N][T][T][N][T]
Checklist of Documents Required for Home Loan2024-02-07 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Housing Loan Approved Instantly?2024-04-10 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Is a Pre-Approved Home Loan and How Should You Get It Done?2024-03-12 | 5 min
tax Tax
[N][T][T][N][T]
Should You Get a Home Loan to Save Your Taxes?2024-02-01 | 3 min
home+loan Home Loan
[N][T][T][N][T]
How to Pay Off Your Home Loan Quicker2024-03-11 | 4 Min
cibil Cibil
[N][T][T][N][T]
How Business Loans Affect Your CIBIL Score & How to Improve the Same2024-03-13 | 6 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Short vs. Long Loan Against Property Tenor - Which Is Better?2024-05-07 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Consider These Factors Before Foreclosing Your Home Loan2024-04-16 | 3 min
tax Tax
[N][T][T][N][T]
What is a Property Tax in India and How is It Calculated?2024-03-13 | 4 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Understanding the Fees and Charges on Your Loan Against Property2024-04-10 | 6 min
cibil Cibil
[N][T][T][N][T]
How Does Missing One Payment Affect Your CIBIL Score?2024-05-15 | 4 min
home+loan Home Loan
[N][T][T][N][T]
6 Ways to Reduce Your Home Loan Interest2024-03-20 | 4 min
cibil Cibil
[N][T][T][N][T]
Ways to Improve Your Credit Score with a Credit Card2024-02-02 | 4 min
cibil Cibil
[N][T][T][N][T]
What Factors Do Not Affect Credit Scores?2024-02-28 | 7 min
cibil Cibil
[N][T][T][N][T]
How to Check Your CIBIL Score for Free and What to Do If There Are Errors in It2024-06-05 | 4 min
home+loan Home Loan
[N][T][T][N][T]
What Affects the Interest Rate on Your Home Loan2024-03-13 | 5 min
loan+against+property Loan Against Property
[N][T][T][N][T]
3 Different Loan Against Property Types You Should Know About2024-02-13 | 5 Min
loan+against+property Loan Against Property
[N][T][T][N][T]
Easy Ways to Pick the Right Loan Against Property Tenor2024-05-14 | 3 min
cibil Cibil
[N][T][T][N][T]
How to Check, Calculate, and Improve CIBIL Score?2024-01-11 | 2 min
tax Tax
[N][T][T][N][T]
How to Save Tax for Salary Above 30 Lakh?2023-08-07 | 6 min
tax Tax
[N][T][T][N][T]
How to Save Tax Between Rs 20 to Rs 25L Salary in India2023-07-19 | 6 min
home+loan Home Loan
[N][T][T][N][T]
10 Smart Steps for Effective Home Loan Management2024-02-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Advantages for First-Time Home Buyers2023-07-14 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Understanding Loan-to-Value Ratio (LTV) and its Calculation2023-11-28 | 4 Min
home+loan Home Loan
[N][T][T][N][T]
How to Determine Your Ideal Credit Score for a Home Loan?2024-03-28 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Would it be Possible for Me to Apply for a Second Mortgage?2024-05-22 | 3 min
cibil Cibil
[N][T][T][N][T]
Easy Ways to Maintain a Good Business Credit Score2024-01-10 | 5 min
cibil Cibil
[N][T][T][N][T]
Impact of Late Payment on CIBIL Score?2024-03-08 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Common Myths About Home Loans: All You Need to Know2024-04-08 | 5 min
[N][T][T][N][T]
5 Benefits of Availing of a Home Loan at an Early Age2024-05-10 | 3 min
[N][T][T][N][T]
7 Smart Ways to Boost Your CIBIL Score for a Home Loan2024-05-09 | 6 min
cibil Cibil
[N][T][T][N][T]
Pay Minimum Amount Due on Your Credit Cards Will Impact Your Credit Score2024-03-11 | 5 min
cibil Cibil
[N][T][T][N][T]
Here’s How a Short-term Loan Can Help You Improve Your CIBIL Score2024-03-25 | 5 min
cibil Cibil
[N][T][T][N][T]
How Can I Raise My Credit Score From 360 to 800 Within a Year?2024-03-21 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is an NOC Letter and Why is it Important?2024-05-14 | 3 min
tax Tax
[N][T][T][N][T]
Income Tax Structure in New Regime: New Tax Exemption Limit 20232024-05-08 | 4 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Top 5 Issues Regarding Loan Against Property Application Rejection that You Might Face2023-02-14 | 5 min
tax Tax
[N][T][T][N][T]
Know all About Top Up Loans and How to Avail of Tax Benefits2023-12-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Tips for Lowering Home Loan Interest Rates in 20232024-03-19 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How Can Your Credit Score Impact Your Home Loan Interest Rate?2024-02-13 | 6 min
[N][T][T][N][T]
Everything You Need to Know About Home Loan Tax Benefits2024-04-23 | 6 min
cibil Cibil
[N][T][T][N][T]
Does a Name Change Affect Your Credit Score2024-01-07 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Balance Transfer: Benefits, Eligibility, and More2024-05-15 | 3 Min
home+loan Home Loan
[N][T][T][N][T]
Benefits of Submitting a Digital Home Loan Application in Current Times2023-12-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Common Mistakes to Avoid When Applying for a Home Loan2023-12-04 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Differences Between Fixed and Floating Interest Rates2024-05-15 | 2 min
cibil Cibil
[N][T][T][N][T]
Everything You Should Know About Your CIBIL Score2024-02-09 | 7 min
tax Tax
[N][T][T][N][T]
Top Benefits of Using an Online Income Tax Calculator2023-12-28 | 5 min
cibil Cibil
[N][T][T][N][T]
What is Credit Score and Its Impact on Loan Availability2023-03-27 |
cibil Cibil
[N][T][T][N][T]
What Does Your Credit Score Tell About You?2024-06-11 | 5 min
cibil Cibil
[N][T][T][N][T]
Know How Mortgage Loan Affect Your CIBIL Score2024-02-05 | 5 Min
home+loan Home Loan
[N][T][T][N][T]
ITR Filing for Home Loan – Know the Right Process to File Your Income Tax Returns2024-02-16 | 5 min
cibil Cibil
[N][T][T][N][T]
Why is a CIBIL Score Measured Between 300 and 900?2024-05-07 | 4 min
cibil Cibil
[N][T][T][N][T]
What are the Types CIBIL Errors & How to Correct Them?2023-11-22 | 6 min
cibil Cibil
[N][T][T][N][T]
What is CIBIL? Understand How It Works and Its Importance2024-01-31 | 6 min
tax Tax
[N][T][T][N][T]
What Does It Mean to Have a CIBIL Score of -12023-06-16 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan Terminologies2024-06-01 | 3 min
cibil Cibil
[N][T][T][N][T]
What Are Tradelines and How to Find Them On Your Credit Report?2024-05-28 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Ways to Check Bajaj Housing Loan Account Numbers2024-04-05 | 3 min
home+loan Home Loan
[N][T][T][N][T]
What Do You Need to Know About Home Loan Foreclosure?2023-03-23 | 5 min
cibil Cibil
[N][T][T][N][T]
Introduction to Credit Information Bureau India Limited (CIBIL)2024-04-15 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Section 80EE: Claim Deductions on the Home Loan Interest Paid2023-02-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
What is the Process to Get Your Home Loan Approved Fast with Bajaj Housing Finance?2024-02-15 | 6 min
home+loan Home Loan
[N][T][T][N][T]
What are the Different Types of Loans Available in India?2024-01-02 | 5 Min
cibil Cibil
[N][T][T][N][T]
What Does a Zero or Negative Credit Score Mean?2023-02-24 | 4 min
cibil Cibil
[N][T][T][N][T]
How Many Credit Inquiries are Too Much in a Year2023-09-21 | 2 min
cibil Cibil
[N][T][T][N][T]
How to Check CIBIL Score Online?2023-03-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Top 5 Home Loan Benefits for First-time Woman Buyers2024-05-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Importance of an NOC Letter after Closing Your Home Loan2023-12-14 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Benefits of a Joint Home Loan with your Spouse2023-08-04 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How to Pick the Best Home Loan Tenor that Suits Your Budget2023-06-29 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How Digital Platforms Are Revolutionising the Face of Housing Finance2023-12-21 | 7 min
home+loan Home Loan
[N][T][T][N][T]
What is the Ideal Down Payment for a Home Loan?2024-05-16 | 5 min
tax Tax
[N][T][T][N][T]
Comparison Between New Tax Regime vs Old Tax Regime2024-04-10 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Know All About the Home Loan Foreclosure Procedure2023-12-20 | 5 min
cibil Cibil
[N][T][T][N][T]
10 Common Myths About CIBIL Score2024-03-27 | 4 min
cibil Cibil
[N][T][T][N][T]
Check CIBIL Score with PAN Card for Free, in 3 Steps2024-02-27 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Advantages of Including a Co-Applicant on Your Home Loan2024-01-21 | 7 min
home+loan Home Loan
[N][T][T][N][T]
What is the Difference Between Top-up Loan and Home Improvement Loan2023-01-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Are Registration Charges Compulsory When You Opt for a Home Loan?2024-04-15 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Can I Take a Home Loan and a Personal Loan Together?2024-01-17 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Should You Take a Home Loan Even If You Have Enough Money to Buy a House?2023-01-30 | 3 min
home+loan Home Loan
[N][T][T][N][T]
7 Common Problems You May Face While Applying For Home Loan2024-01-18 | 7 min
home+loan Home Loan
[N][T][T][N][T]
What Happens If Home Loan EMI Bounces? Know the Consequences2023-07-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Hybrid Flexi Loan vs. Personal Loan: Which One is Better?