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Query regarding availing income tax exemption on Home loan and Rent paid

I have a query regarding availing tax exemption. I am staying in rented house till this month. Also I got possession for my newly purchased house this month. Can I avail tax exemption on rent paid for April to December 2015 and Interest and principal paid for home loan since April 2015 to March 2016?

Dec 28, 2015 by Amol,   |   Taxation

You can claim tax deduction for house rent payment. If you are salaried and receive House Rent Allowance from your employer, the Maximum allowable deduction is the least of the following:-

  • HRA paid by your employer

  • Excess rent paid over 10% of your basic salary.

  • 50% of your basic salary if you are living in a metro city or 40% of your basic salary in case you are living in a non metro city

If you are self employed or do not receive HRA, the Maximum allowable deduction under Section 80GG is the least of the following:-

  • 25% of total income

  • Rs 2,000 per month

  • Rent paid in excess of 10% of total income

Unfortunately, you cannot claim 80C deduction for Principal payment or Section 24 deduction for interest payment till you receive the possession of the house. Since you now have received the possession, you can claim 80C deduction for Principal Payment up to the overall 80C limit of Rs 1.5 lacs from now onwards till March 2016. In addition you can also claim deduction for interest payment from now onwards till March 2016, up to the Section 24 limit of Rs 2 lacs.

Further, if for any reason, you continue to pay house rent even after receiving the possession of your house, you can claim deductions for both house rent payment and also home loan principal & interest payment.

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