HRA and Housing Loan Principal For Property

[nitinmukesh123 11]

Hi frnds,

I have a query related to showing HRA and Housing loan principal in investment.

I have bought a flat in the same city I am residing and I have not received the possession of the flat.

Can I show HRA and Housing loan principal.

I am posting it here because I have searched net some are saying you can and some you can't.

Is there any source or govt. site where it can be verified.

Thanks for any help.

[ami1 237]

You can't claim housing loan principal & repayment until you get possession.

But after you get possession you can claim the previous 2 (or maybe 3, i don't remember) years repayments in the year you get possession.

For details of IT rules you can go to incometaxindia.gov.in or go here directly to IT rules: http://law.incometax...e-tax-acts.aspx

Unfortunately, they have changed the layout of the rules drastically so i'll need some time to link you to the correct section.

Go to page 2 and see item no 22, 24, 25

Will give you exact section allowing claiming of previous years repayments tonight sometime.

Edited February 13, 2012 by ami1

[nitinmukesh123 11]

Thanks a lot Amitabh ji. I will check these.

[cavarun 13]

if u can post ur question more specifically......

may be i will be in a position to answer ur query............

regards

ps: pm me after putting ur question in detail.

[nitinmukesh123 11]

Ok I will try to explain it again

I have bought a flat in Pune which is under construction so I have not received the possession of the flat. I have loan from bank for which I am paying FULL EMI i.e. Principal and interest.

I am living on rent in the same city Pune.

My company provided HRA allowance to me.

For this financial year I would like to show HRA (House rent) + Principal (under Section 80C) to avail tax benefit under different sections.

My company accountant is saying that I can only show either one from the above. i.e. HRA or Housing loan principal

I did search regarding this on several forum and everyone have different opinion. I just want to confirm if I could show both or not.

Thanks all for your time.

Edited February 14, 2012 by nitinmukesh123

[ami1 237]

1. To start claiming housing loan deduction/rebate you need to have possession letter. For under construction properties, you can claim previous years housing loan deduction/rebates once you get the possession letter.

2. You can show HRA & Housing Loan both only if you are not living in your house for a justified reason (ie it is too far from your place of work - usually it needs to be in different city but there's no explicit rule saying this - so you can probably get by if its far away or if its much smaller/bigger than what you need).

3. Maximum benefit is when you rent out your owned flat while you live in a rented flat yourself. In this case you can claim full interest while your rent income will be added as income (less 30% deduction allowed for maintenance etc) while you can also claim HRA exemption. Off course your need to live in rented house should be justifiable as mentioned above (ie too far or too small etc)

I know its pretty complicated the first time you do. Specially, claiming previous years housing loan dedn/rebate once you get possession letter.

There is absolutely NO RULE saying you can't claim both HRA & Housing Loan - in fact its done by everyone who owns a house in a different city while living in the city where he/she works.

Its just that doing it when both are in same city requires some good justification as a backup - though IT Dept never really worries much about this unless you have many houses.

So, in your case - first wait to get the possession letter; then claim previous years dedn/rebates. Then if you are not living in your own house and have rented it out you can claim HRA as well as principal/interest (without any limit) provided you show rent income. If its not rented then the usual 1.5L limit will apply for interest. If you start living in your own house, then you can only claim housing loan dedn/rebate and not HRA.

Actually, I have found that housing loan dedn/rebate is hardly worth anything as HRA dedn is usually higher. Its just that you are getting to own an asset and getting some benefit.

[nitinmukesh123 11]

Thanks Amitabh ji for ther detailed explanation.

I will now have to invest 90K to get tax benefit under 80C.

Edited February 14, 2012 by nitinmukesh123

[rajanmehta 4,056]

^ ^ ^

AFAIK, Income Tax Act does not prohibit you from giving a reputation point to Amitabh Ranjan for such an authentic, detailed and informative post.

How much time he would have spent for typing, collecting info for that post?

Time for you to click on that green up arrow button! 1 Second!

[cavarun 13]

i thing the answer has been already replied properly......

however, you can request your bank to not to take pricipal repayment from you till u get possession / sale deed registered in ur name.

this is so coz u can not claim principal repayment for earlier years in ur subsequent return.

best way for u to ask ur bank to charge only interest till u get possession of the flat.

as interest for pre-possession period can be claimed in 5 years.

[underearth 0]

I'm also starting my full emi from this month, and will be getting possession this yeas end or Jan 2013, so as per say, I can claim deduction in fiscal year 2012-13??

Thanks for info

[nitinmukesh123 11]

Sunny,

You can avail tax benefits for both Principal and Interest paid in the financial year 2012-2013.

Edited February 14, 2012 by nitinmukesh123

[nitinmukesh123 11]

Sorry rajanji just did that

Here is the extract from site

[manishag 17]

for Loan on under construction property can be claimed for tax rebate only under following condition

Rs. 1,50,000 maximum deduction will not be available in the following situations:

1. if capital is borrowed before April 1, 1999 for purchase,construction, reconstruction, repairs or renewals of a house property;
   
2. if capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
   
3. if capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed. In the above situations only deduction upto Rs. 30,000 can be claimed.
   

source : http://www.simpletaxindia.net/2010/02/interest-on-house-loan-self-occupied.html

[MOBILE FAN 42]

Good explanation by Amitabh Ranjan.

I researched about this approx 3 years back and since then I am claiming HRA and Home Loan.

I dont have a URL to this article but I made a PDF when it published. This would give more details from horse's mouth.

DNA Article - Dont mix HRA Home Loan benefits.PDF

[amtrag 20]

Dear Nitin, My employer is allowing principal repayment under sec 80c even if the house is under construction. The condition being that (1) EMIs are being paid, (2) stamp duty/ registration charges have been paid & (3) the sales consideration has already been paid or promised to be paid, then the person will be a "Deemed Owner" under section 27 (iiia). For availing this benefit, the seller/builder needs to provide a declaration that the sales consideration has been paid/promised to be paid and the person to give proof of such payments (incl stamp duty/ registration). So I would advise you to consult a CA and if he/she can confirm, then there is no need to make any additional investments. Let your employer deduct the tax (since they are not allowing this) and later on, claim refund in the tax returns. Disclaimer: Pl do not base your decision on my advise above. Consult a CA before making a final decision. I am advising you only because it might save you from investing and thus locking in Rs. 90,000 for atleast 5 years.

Edited February 15, 2012 by amtrag

[nitinmukesh123 11]

i thing the answer has been already replied properly......

however, you can request your bank to not to take pricipal repayment from you till u get possession / sale deed registered in ur name.

this is so coz u can not claim principal repayment for earlier years in ur subsequent return.

best way for u to ask ur bank to charge only interest till u get possession of the flat.

as interest for pre-possession period can be claimed in 5 years.

Hi Varun,

I actually wanted to pay full EMI so the principal keep reducing as well. IN 2 years time principal is reduced to 3L.

Actually from past 2 years I was showing both HRA and Housing loan principal and had no issues. This time the whole payroll is shifted to another company and thats when this issue pop up.

Thanks everyone for your help.