ur readers have been flooding us with questions related to tax benefits on home loans and HRA. A common theme runs through these questions: Can we avail of both?

The answer is Yes and No. 

Read on to figure out what is applicable to your situation.   

Let's begin by talking about home loans

1) How much of a rebate can I get on my home loan?

The principal repayment you make on your home loan is eligible for income deduction under Section 80 C. The principal is the actual amount that you borrow from the home loan company.

Incidentally, registration and transfer fees -- if covered in the home loan -- fall under this limit.

Let's say that your taxable income is Rs 100,000 and you repaid the home loan principal of Rs 40,000. Your taxable income drops to Rs 60,000 (Rs 100,000 - Rs 40,000).

The limit under Section 80 C is Rs 1,00,000.

This will include certain investments -- provident fund, public provident fund, life insurance premium, equity linked savings schemes of mutual funds, infrastructure bonds, pension plans -- and home loan principal repayment.

There are no sub-limits within this section; you can utilise the entire Rs 1 lakh exemption for home loan principal repayment deduction.

2) What is the deduction on interest I pay on my home loan?

Under Section 24, the maximum amount of interest that can be deducted from your income is Rs 1,50,000. As a result, your taxable income decreases by that amount.

Let me explain with an example.

Salary income: Rs 3,50,000

Interest payment on home loan: Rs 1,60,000

Taxable income = Rs 3,50,000 (income) - Rs 1,50,000 (maximum limit for interest on home loan) = Rs 2,00,000 

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Now let's talk HRA

House Rent Allowance is a component of your salary package. This allowance is given by an employer to an employee to meet the cost of renting an accommodation.

If you pay no rent either because you stay in a rent-free accommodation or live with your family or in your own house, you will not get this benefit.

Also, if the rent you pay does not exceed 10% of your salary, then too this will not be available.

Can you avail of all these benefits?

Yes, you can avail of all the three under certain situations:

1) HRA

2) Deduction on home loan principal repayment

3) Deduction on interest paid on home loan

Let us evaluate some of them.

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Situation I

You have only one home for which you have taken a home loan. And you are residing in this home.

In such a case, you can avail of:
- Home loan interest upto Rs 1,50,000 under Section 24.
- Home loan principal upto Rs 1,00,000 under Section 80 C.

Situation II

You take a home loan to buy a house which your parents live in. But, because it is at a considerable distance from work, you rent out a place close to your office.

Now your home as well as the one you are renting are all in one city.

In such a case, you can avail of: 
- HRA deduction under Section 10 (13A).
- Home loan interest upto Rs 1,50,000 under Section 24.
- Home loan principal upto Rs 1,00,000 under Section 80 C.

But your employer may not grant you the HRA deduction if both houses are in the same vicinity. Your home must be at a considerable distance for you to stay elsewhere.

Situation III

You have taken a home loan, but you live in another city.

Let's say you are working in Delhi and paying rent for your accommodation. But you have a home in Mumbai and you are repaying a home loan for that house.

In such a case, you can avail of: 
- HRA deduction under Section 10 (13A).
- Home loan interest upto Rs 1,50,000 under Section 24.
- Home loan principal upto Rs 1,00,000 under Section 80 C.

Situation IV

You have taken a loan for a house that you have rented out. You are staying in rented accommodation.

You cannot claim the home loan principal deduction under Section 80C, as it is exclusively for a self-occupied home (you are residing in that home). An exception is if the home is in another city � see Situation III.

In such a case, you can avail of:
- HRA deduction under Section 10 (13A).
- Home loan interest with no limit (maximum of Rs 1,50,000 only if it is self-occupied) under Section 24.

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HRA exemptions are only available on submission of rent receipts or the rent agreement, since this serves as proof that you are paying rent.

However, if the rent is less than Rs 3,000, it is not mandatory.