HRA and Home Loan Tax Benefit: Many salaried taxpayers who rent a house even after purchasing a new one, or who work in a different city, often wonder: “Is it possible to claim tax exemption on both house rent allowance (HRA) and home loan?”
One individual posed a question to the expert, stating, “I secured a home loan for a flat that is still under construction, which I took possession of in August 2025. I promptly rented out this flat and am currently residing in another rented property. Can I claim tax benefits on both HRA and home loan for the entire year when I submit my ITR for the financial year 2025-26?”
Let’s explore, with insights from leading financial experts, what the Income Tax Act stipulates regarding this and the complete rules involved.
Can HRA and home loan exemption be claimed at the same time?
Yes, indeed! According to the Income Tax Act of 1961, there are no legal barriers to claiming tax benefits on both HRA and home loan at the same time, as long as you satisfy the basic requirements for both claims:
Conditions for HRA: You must be receiving HRA from your employer under Section 10(13A) of the Income Tax Act, you should be genuinely paying rent for the property you occupy, and the property should not be registered in your name.
Condition for Home Loan: You can claim home loan tax benefits for the entire financial year in which you take possession of the property.
Maximum benefits are available under the old tax system
It’s important to note that the tax exemptions for HRA and home loan principal are entirely dependent on the tax regime you select. The HRA exemption under Section 10(13A) and the exemption of up to Rs 1.50 lakh on home loan principal repayment under Section 80C are only available under the old tax regime. If you opt for the new tax regime, you will forfeit both of these exemptions.
Tax exemption rules on home loan interest
The calculation for tax deduction on loan interest is influenced by your income from the property and the tax regime you have chosen. The rules for home loan interest deduction (Section 24b):
Old tax regime: You are allowed to claim the full amount of interest paid throughout the year as house rent. Furthermore, losses up to ₹2 lakh under the house property category can be offset against your other income. If your loss surpasses ₹2 lakh, it can be carried forward for the next eight years.
New Tax Regime – In the new tax regime, the deduction for home loan interest is restricted to the taxable rent you receive. Losses from house property cannot be offset against other income or carried forward.
4. Additional benefit of pre-construction interest
Experts indicate that there is another important advantage for taxpayers in the year they take possession. You can claim home loan interest for the entire year of possession, plus you can claim one-fifth of the total interest paid during the pre-possession period each year.
If your property is rented out while you reside in another rental property, you can benefit from a double tax break on both HRA and home loan (interest + principal) in the same year, provided you adhere to the regulations. Select the appropriate tax regime based on your financial circumstances to optimize your benefits.