Can I Claim Both HRA and Home Loan Interest Deduction in FY 2024-25?
- Indrajeet Sharma
- Mar 6
- 7 min read
Updated: Apr 17
It is common for salaried individuals to take a home loan while continuing to live in rented accommodation, often due to work relocation, family needs, or ongoing construction of their self-owned property. In such cases, taxpayers wonder if they can claim both House Rent Allowance (HRA) and home loan interest deduction in the same financial year.
The Income Tax Law do allow both benefits, but only when certain conditions are met. HRA exemption is available under Section 10(13A), while home loan interest can be claimed under Section 24(b). These two deductions serve different purposes, but cannot be claimed together if the individual resides in their self-owned property.
Whether both benefits can be claimed depends on where the individual lives, the status of the owned house, and the structure of the salary. Applying these rules correctly can help reduce tax liability without triggering compliance issues.
Table of content
Can I Claim Both HRA and Home Loan Interest Deduction in FY 2024-25?
While filing the ITR for FY 2024–25, you cannot claim both House Rent Allowance (HRA) and home loan interest deductions under the new tax regime. The new regime eliminates most exemptions and deductions, including HRA under Section 10(13A) and home loan interest for self-occupied properties under Section 24(b). However, if you have a let-out property (i.e., a rented-out house), you can still claim a deduction for the interest paid on the home loan for that property, as this deduction remains permissible under the new regime. To benefit from both HRA and home loan interest deductions, you would need to opt for the old tax regime, where these exemptions are still available.
Understanding HRA (House Rent Allowance) Exemption
What is HRA?
House Rent Allowance (HRA) is a component of the salary package offered by employers to help employees meet rental housing costs. Under the old tax regime, HRA is partially or fully exempt from income tax as per Section 10(13A) of the Income Tax Act, subject to certain conditions.
Who Can Claim HRA?
HRA can be claimed by individuals who meet the following criteria:
The individual must be a salaried employee and receive an HRA component as part of their salary package.
The employee must be paying rent for residential accommodation.
Self-employed individuals cannot claim HRA.
HRA cannot be claimed by:
Individuals who are self-employed.
Employees who live in their own homes and do not pay rent.
Those who do not receive an HRA component in their salary.
HRA Exemption Calculation Under the Old Tax Regime
The HRA exemption is calculated as the least of the following three values:
Actual HRA received from the employer.
50% of basic salary (for metro cities) or 40% of basic salary (for non-metro cities).
Actual rent paid minus 10% of basic salary.
Example Calculation:
Annual salary: ₹10,00,000
HRA received: ₹3,00,000
Rent paid per year: ₹2,50,000
Basic salary (metro city): ₹5,00,000
HRA exemption is calculated as:
Actual HRA received: ₹3,00,000
50% of basic salary (metro city): ₹2,50,000
Rent paid minus 10% of basic salary: ₹2,50,000 - ₹50,000 = ₹2,00,000
The lowest of these values is ₹2,00,000. Therefore, ₹2,00,000 will be exempt, and the remaining ₹1,00,000 of HRA will be taxable.
Understanding Home Loan Interest Deduction (Section 24(b))
How Does Home Loan Tax Deduction Work?
If an individual has taken a home loan, they may be eligible for deductions under different sections of the Income Tax Act depending on the type of repayment and the nature of the property.
Section 24(b): Deduction on Interest Paid on Home Loan
Applicable to both self-occupied and let-out properties.
For self-occupied property, the deduction limit is ₹2 lakh per annum.
For rented properties, there is no upper limit on the interest deduction, though the overall loss from house property that can be adjusted against other income is capped at ₹2 lakh per year.
Section 80C: Deduction on Principal Repayment
The principal portion of the EMI can be claimed as a deduction under Section 80C, up to a maximum of ₹1.5 lakh per year.
This deduction is available only for self-occupied or rented properties, not for under-construction properties unless possession is taken.
Section 80EE and 80EEA: Additional Benefits for First-Time Buyers
Section 80EE: Deduction up to ₹50,000 for interest on loans sanctioned between 1 April 2016 and 31 March 2017.
Section 80EEA: Additional deduction of ₹1.5 lakh for interest on loans sanctioned between 1 April 2019 and 31 March 2022, where the stamp duty value of the property does not exceed ₹45 lakh.
These deductions can be claimed in addition to Section 24(b), provided the eligibility criteria are met.
Can You Claim Both HRA and Home Loan Interest Deduction?
Yes, both HRA exemption under Section 10(13A) and home loan interest deduction under Section 24(b) can be claimed in the same financial year—but only if certain conditions are satisfied.
Situations Where Both Benefits Can Be Claimed:
The taxpayer owns a house in one city but lives in a rented house in another city due to work.
The taxpayer’s owned house is under construction, and they are currently living in rented accommodation.
The taxpayer has rented out their owned house and is living in a separate rented house.
In these cases, HRA can be claimed for the rent paid, and home loan interest can be claimed for the owned property.
Situations Where Both Cannot Be Claimed:
The individual is living in their own self-occupied house and not paying rent.
The employer does not provide HRA as part of the salary.
The taxpayer claims both without actually paying rent, which may lead to notices or disallowance by the income tax department.
Correctly applying these rules can help optimize tax benefits and avoid compliance issues.
Old vs New Tax Regime: Which One Offers More Benefits?
Choosing the right tax regime depends largely on your eligible deductions. Here is a comparison of how key benefits differ across the two regimes.
Feature | Old Regime | New Regime |
HRA Exemption (Section 10(13A)) | Available | Not Available |
Home Loan Interest Deduction (Section 24(b)) | Available | Not Available (for self-occupied homes) |
Principal Repayment Deduction (Section 80C) | Available | Not Available |
Which Tax Regime Is More Beneficial?
Old Regime: Preferred by individuals who pay high rent or have significant home loan interest payments (especially over ₹2 lakh), as well as other deductions under Sections 80C, 80D, etc.
New Regime: Suitable for those with minimal deductions or simplified salary structures. The lower slab rates can reduce tax liability when no major exemptions are claimed.
Case Studies: Maximizing Tax Benefits
Case 1: Employee Paying Rent While Owning a Home in Another City
Salary: ₹12,00,000
HRA Received: ₹3,60,000
Rent Paid: ₹25,000 per month
Home Loan Interest Paid: ₹2,20,000
Outcome: The employee can claim both HRA exemption and home loan interest deduction under the old tax regime, resulting in substantial tax savings.
Case 2: Employee Living in Their Own Home and Paying EMI
Salary: ₹15,00,000
Home Loan Interest Paid: ₹1,80,000
Outcome: Since the employee is residing in their own home, they cannot claim HRA. However, home loan interest deduction (up to ₹2 lakh) and principal repayment under Section 80C can still be claimed if opting for the old regime.
Common Mistakes to Avoid When You Want to Claim HRA and Home Loan Interest Deduction
When claiming HRA and home loan deductions, the following mistakes should be avoided:
Claiming both benefits without meeting eligibility conditions
Failing to maintain rent receipts or valid rent agreements
Not retaining home loan interest certificates or EMI statements
Not informing the employer about your home loan to get it reflected in Form 16
Declaring false rental arrangements, which could lead to tax scrutiny
Maintaining proper documentation is essential for smooth claims and to avoid disallowances during assessment.
Conclusion
Claiming both HRA and home loan tax benefits is possible but subject to clearly defined conditions. These deductions can be combined only when the taxpayer is living in rented accommodation and not residing in their self-occupied property.
Choosing between the old and new tax regime depends on your salary structure, rent, loan interest payments, and total deductions available. A careful comparison of both regimes is necessary to determine the most tax-efficient choice.
FAQs
1. Can I claim both HRA and home loan deduction in the same financial year?
Yes, but only under specific conditions. If you live in a rented house and own a home in another city or if your owned house is under construction, you can claim both.
2. Can I claim HRA if I live in my own house?
No, HRA is only available if you pay rent. If you live in your self-owned home, you cannot claim HRA.
3. Is home loan interest deduction available in the new tax regime?
No, home loan interest deduction under Section 24(b) is not available for self-occupied property in the new tax regime.
4. Can I claim HRA for a house I own and live in?
No, you cannot pay rent to yourself and claim HRA.
5. What if I own a house but stay in a rented home in the same city?
You can claim both HRA and home loan interest deduction if you can justify that the owned house is not suitable for residence due to work location or other valid reasons.
6. Can a self-employed person claim both benefits?
No, self-employed individuals cannot claim HRA but can claim home loan interest deduction under Section 24(b).
7. What if my home loan property is rented out?
If your owned house is rented, you can claim unlimited home loan interest deduction under Section 24(b) and also claim HRA if you stay in a rented house.
8. Can I claim HRA if I pay rent to my parents?
Yes, but you must ensure a legal rent agreement exists, and your parents must declare the rent as income.
9. Do I need to submit proof for both HRA and home loan deductions?
Yes, rent receipts are required for HRA, and home loan EMI statements are required for interest deductions.
10. What if I have a joint home loan?
Each co-owner can claim ₹2 lakh home loan interest deduction separately if they contribute to the EMI payments.
11. Can I switch between old and new tax regimes every year?
Yes, salaried employees can choose between the old and new tax regimes every year when filing returns.
12. Does claiming both benefits increase my chances of an income tax notice?
No, as long as you meet the eligibility criteria and provide valid documentation, there is no issue in claiming both benefits.
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