Dev Singhraha
Relocation Expert
Income tax laws allow the tax payers to enjoy various tax benefits on the property, whether owned or rented, by the tax payer.
 
Conditions to claim tax benefits on HRA:
The tax benefit on HRA is available to the person who receives the HRA from their employer. It is not available for the person who is self employed. To claim the benefit, the employee must have incurred the expenditure on the HRA with respect to the residential house occupied by them. This benefit is not available for the residential property that is on rent and occupied by someone else irrespective of whether they are dependent on the assessee or not. It is not available, whether the property is partly or fully owned by the assessee.

If the employee rents out his property to his employer, and the employer, in turn, rents it out to some another employee, then also the benefit cannot be claimed. Similarly, if the employee is the joint owner of the property and pays some rent to the other joint owner of the property, then also the HRA cannot be claimed.

According to the rule 2A of the income tax rules, the benefit of HRA shall be restricted to the lowest of the following three amounts:

1.    HRA actually received.
2.    Excess of rent paid over basic salary.
3.    50 percentof basic salary in case the person lives in any of the four metro cities and 40 percent if he lives in any other city.

The law does not stipulate that HRA cannot be claimed if the tax payer already owns a house and is claiming the tax benefit with respect to the housing loan.
 
Conditions for claiming tax benefit on home loans:
The main condition for the allowance of deduction on the principal and interest component under Section 24(b) and 80C is that the person should be the owner of the property. Tax benefits under Section 80C are only available for the home loans taken from a specified person, for the residential property. Interest benefits are available for the properties that are residential as well as commercial and on the money borrowed from a bank or any person. The interest on money borrowed for the let-out property is fully deductible. For self occupied property, the benefit of interest is restricted to two lacs per year.
 
Claiming HRA as well as home loan benefits:
The law allows a person to own more than one residential property. However, he can only opt for one property as self occupied and another on rent. It can be inferred that a person can have more than one property as self occupied, given that the other property is not in the same city as the person’s work city. If it is in the same city, it can be a problem claiming two properties as self occupied. 
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