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HRA and Home Loan Tax Benefit: Salaried taxpayers who live in a rented house—even after purchasing a new home—or reside in a different city for work often wonder: "Can I claim tax exemptions for both House Rent Allowance (HRA) and a home loan simultaneously?"

An individual asked an expert: "I took a home loan for an under-construction flat and received possession in August 2025. I immediately rented out this flat and am currently living in another rented apartment. Can I claim tax benefits for both HRA and the home loan for the entire year when filing my ITR for the financial year 2025-26?"

Let us understand what the Income Tax Act says about this and what the specific rules are, based on insights from leading financial experts.

1. Can one claim exemptions for both HRA and a home loan simultaneously?

Yes, absolutely! There is no legal restriction under the Income Tax Act, 1961, against claiming tax benefits for both HRA and a home loan at the same time, provided you meet the basic conditions associated with both claims:

Conditions for HRA: Under Section 10(13A) of the Income Tax Act, you must receive HRA from your employer, actually pay rent for the house you reside in, and the house must not be owned by you.

Conditions for home loan: You become eligible to claim tax benefits on the home loan for the entire financial year in which you receive possession of the property.

2. Maximum benefit under the old tax regime

Keep in mind that the tax exemptions available for HRA and the home loan principal amount depend entirely on the tax regime you have chosen. Exemptions on HRA under Section 10(13A) and on home loan principal repayment up to ₹1.50 lakh under Section 80C are available only under the old tax regime. If you opt for the new tax regime, both these exemptions will no longer be available.

3. Rules regarding tax exemption on home loan interest

The calculation of the tax exemption on home loan interest depends on the income generated from the house and the tax regime you have chosen. Here are the rules regarding the exemption on home loan interest (Section 24b):

Old Tax Regime – You can claim the entire interest paid during the year against the rental income earned from the house. Additionally, a loss of up to ₹2 lakh under the 'Income from House Property' head can be adjusted against your other income. If the loss exceeds ₹2 lakh, it can be carried forward for the next 8 years.

New Tax Regime – Under the new tax regime, the deduction for home loan interest is limited to the amount of taxable rental income earned. It does not allow for setting off the loss from house property against other income or carrying it forward to future years.

4. Additional benefit of pre-construction interest

According to experts, taxpayers enjoy another significant benefit in the year possession is received. You can claim the home loan interest paid during the year of possession. Furthermore, you can claim one-fifth of the total interest paid during the pre-possession period annually.

In summary, if your property is rented out and you are living in another rented house, you can—subject to compliance with the rules—avail the benefit of a double tax break on both HRA and home loan (interest + principal) in the same year. Choose the right tax regime based on your financial situation to maximize benefits.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.