You can claim both HRA and home loan deductions

“Why does everyone hate the HR?” Ruma asked over lunch the other day.

“Because they are stupid,” I told my good friend, trying to use chopsticks to eat.

“Stupid, why?”

“Take the other day, when I was submitting a rent receipt from my landlord as proof for the house rent allowance (HRA) deduction. They told me as per the company’s HR policy, I had to provide a copy of my rent agreement as well.”

“So?” “As far as the Income Tax Act is concerned, it asks for either the rent receipt or the rent agreement as proof and not both.” “Did you try telling them that?”

“I did. I was told by some pretty young thing that the company HR policy overrides the Income Tax Act.”

“Really? So what did you do?”

“Oh, I submitted a copy of the rental agreement.” “But if you had the agreement, then what was the problem?”

“Well, one was the stupid comment and second, they were not following the law of the land.” “But that’s just one instance,” she protested.

“No, there’s more. As you know, my parents live in the flat that I bought last year, and I continue to live in the rented accommodation I have been in for the last few years. I like my sense of space and so do my parents. Even though we stay very near, we like the present arrangement.”

“So?”

“Well, I bought the flat my parents stay in with a home loan. As per the Income Tax Act, you can make a deduction of up to Rs1.5 lakh from the taxable income for the interest paid on a home loan. Now I want to claim a deduction for the rent I pay against the HRA I receive every month as well as the interest I have been paying on the home loan, but that pretty young thing contends you cannot claim a deduction for both HRA and the interest paid on home loan.”

“But isn’t that correct?”

“No, it’s not. As far as the Income Tax Act is concerned, one does not influence the other.”  “As in?”

“Nowhere does the Act say that these two deductions are mutually exclusive, which means if you claim one deduction, you cannot claim the other. The HRA deduction is dealt under Section 10(13A). What it says is that the taxpayer should be paying rent for a house he does not own. If this condition is met, the deduction can be claimed. The interest on home loan is allowed as a deduction under Section 24. None of these two sections specifies that if you are claiming one deduction you cannot claim the other.”

“Are you implying that silence signifies approval? That if something is not specified directly under some section, it does not mean it is not allowed?”

“That’s exactly what I mean. Take the deductions allowed under Section 80C for various investments made and Section 80D, which provides a deduction for premium paid on a health insurance policy. We all claim separate deductions for these. But where does it say that separate deductions are allowed?” “I get the point. But as far as I remember, the interest on home loan is allowed as a deduction only for a “self-occupied” property,” she said.

“That’s right. But Section 23(2) of the Income Tax Act, which defines “self-occupied” property, states that a self occupied property need not be self-occupied, but should be meant for ‘self occupation’.” “That clears it then.”

“Yes, as a tax payer, we can claim a deduction for both interest paid on a home loan as well as HRA.”

“Did you explain this to the pretty young thing?” “Yes I did. She asked me which Section of the Income Tax Act says so?” “Huh.”

“As Daddy often says, “A woman who wears pink nail polish and has had her hair straightened is not pretending to be dumb.””

“But that’s such a sexist statement to make,” said Ruma.

“Well men are sexist. And I didn’t say that.”

The writer works in the financial services industry and can be reached at chandniburman@
yahoo.com. The views expressed are personal.