Q&A

To claim HRA deduction, one should be paying rent

AN Shanbhag, Sandeep Shanbhag
Posted: Sunday, Aug 10, 2008 at 0219 hrs IST
Updated: Sunday, Aug 10, 2008 at 0219 hrs IST

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: I came to know, for the first time that I can claim for HRA even if I am living in my own house, which I am paying home loan installments for.

However, I couldn't understand from where I will get the rent receipts to show against the HRA.

Is there any alternative process to claim HRA when I own a home?

I will be very thankful to you if you can clear these points.

—Sunny Tambi

The basic principle behind claiming HRA deduction is that you ought to be paying rent. In other words, without paying rent, you cannot get deduction on HRA. In your case, since you live in a house owned by you, there is no question of paying any rent or producing any rent receipts. Therefore, the full amount of HRA being paid to you will be taxable.

I plan to switch my investment in mutual funds from dividend payout-plan to growth-plan under the same scheme. Will this switching be treated as:

(a) Redemption of the original investment in dividend plan and fresh investment in growth plan involving LTCG / STCG, or

(b) It will not attract LTCG / STCG.

—Satish Chandra

Conversion of a scheme paying regular dividends to a growth scheme is considered a transfer and consequently, this transaction attracts the provisions of capital gains.

Only the conversion of regular dividends to a dividend reinvestment plan is not considered as transfer.

I currently live in a rented place in Thane City and have purchased an under-construction property in Mumbai.

Can I claim HRA benefit (since I am staying in a rented place) and also claim the tax benefits for the under-construction property.

I work in Mumbai and somebody informed me that HRA benefit and home loan benefit can't be claimed in my case. But the benefit of the home loan repayments can be taken over a period after 3 years from the date of possession of my new house.

—Venkatesh Mhatre

The basic principle behind claiming HRA deduction is that you ought to be paying rent. In other words, without paying rent, you cannot get deduction on HRA. In your case, since you are paying rent, you may claim the HRA deduction. Coming to home loan benefit (deduction on interest), the same would be available to you once the house is completed and in your possession. Interest paid during the construction period may be claimed in five equal installments beginning from the year in which the house is...

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