Table of Contents
Table of Contents
Last updated: 31 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
Many people think they must choose between HRA and a home loan. They do not. The two work on different houses and different heads of income, so they can be claimed together if you meet the conditions of each. Both are claimed in the old tax regime.
The HRA exemption is in section 10(13A) of the Income-tax Act, 1961 up to FY 2025-26, and in Schedule III (Table Sl. No. 11) of the Income-tax Act, 2025 from Tax Year 2026-27. It needs:
The exemption is the lowest of the HRA received, 50% (eight metro cities) or 40% of salary, and rent paid less 10% of salary (Rule 279 of the Income-tax Rules, 2026).
Nothing in these conditions stops you owning another house elsewhere.
Interest on a loan taken to buy or build a house is a deduction from house property income: section 24(b) of the 1961 Act, section 22(1)(b) of the 2025 Act.
| Situation | HRA and interest together? | Note |
|---|---|---|
| Own a house in another city and rent a house where you work | Yes | The usual case. |
| Own a house in the same city but rent another for a genuine reason, such as distance to work or a school | Yes, if genuine | Keep full proof of both. |
| Bought an under-construction flat and live on rent | Yes | Pre-completion interest is claimed in five equal parts after completion. |
| Rent out your own loan-financed house and live in a rented house elsewhere | Yes | The rent you receive is taxed as house property income, and the interest is deducted against it. |
A house kept vacant, or used by your family, is generally treated as self-occupied for the interest limit.
Aryan works in Gurgaon, pays rent of ₹10,000 a month and gets an HRA of ₹15,000 a month. His basic salary is ₹40,000 a month. He has a home loan for a house in Bengaluru where his parents live, with interest of ₹20,000 a month.
HRA exemption (monthly): the lowest of ₹15,000 (HRA received), ₹16,000 (40% of basic, as Gurgaon is not one of the eight metro cities) and ₹6,000 (rent ₹10,000 less ₹4,000, which is 10% of basic). So ₹6,000 a month, ₹72,000 a year, is exempt and ₹9,000 a month is taxable.
Interest: ₹2,40,000 a year, but for a self-occupied house the deduction is limited to ₹2,00,000.
In the new regime neither HRA nor interest on a self-occupied house is allowed. Interest on a let-out house is still allowed against the rent received.
Yes, if you live in a rented house that you do not own, pay rent, and have a home loan on a different house, in the old tax regime.
The law does not bar it, but the claim must be genuine, for example because the house is let out, too far from work or under construction. Keep full proof.
₹2 lakh a year for a self-occupied house, if construction or purchase is completed within five years of the year the loan was taken. Otherwise ₹30,000.
No. HRA and the interest on a self-occupied house are not allowed in the new regime. Interest on a let-out house is allowed.
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