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As per amendment in the Income Tax Rules, PAN or Aadhaar are to be mandatorily quoted for cash deposit or withdrawal aggregating to Rupees twenty lakhs or more in a FY. Please update your PAN or Aadhaar. Kindly reach out to the Bank’s contact center on 1800 10 888 or visit the nearest IDFC FIRST Bank branch for further queries.
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FinFIRST Blogs
In most cases, a home loan will give you a more significant tax benefit than HRA in terms of IT deductions
Paying off a home loan and house rent allowance (HRA) come with some tax benefits that should be considered before deciding whether to buy or rent a house. The comparative advantages of the two depend on several factors such as income and rent amounts, city of residence, amount of home loan, tenure and rate of interest, etc. It helps to understand the basic computational rules for the income tax deduction in both cases to make an informed choice:
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House Rent Allowance (HRA)
HRA is a component of salary. Salaried taxpayers who live in rented accommodation can claim an income tax deduction in the form of HRA. The amount of HRA deduction allowed depends on the location of residence, HRA granted by the employer, actual rent paid by the tenant, and their basic salary. The allowable HRA deduction according to the Income Tax Act is the least of the following three amounts:
- HRA granted by the employer
- 50% of basic salary (in case of metro cities) or 40% of the basic salary (non-metro cities)
- Actual rent paid less 10% of basic salary
This can be best illustrated using an example: Mr A lives in Mumbai and earns an annual basic salary of Rs 6,00,000 and an annual HRA of Rs 1,80,000. He pays an annual rent of Rs 3,60,000. The above three amounts for him will work out to:
- HRA granted: Rs 1,80,000
- 50% of basic salary: Rs 3,00,000
- Rent paid minus 10% of basic salary: 3,60,000 – 60,000 = Rs 3,00,000
In this case, Mr A will be entitled to an HRA deduction of Rs 1,80,000 for income tax purposes. This deduction can be set off against income from salary or any other type of income.
IDFC FIRST Bank provides home loans with interest rates as low as 6.90% and tenures as long as 30 years to facilitate homeownership for all. Our home loan application and approval process are entirely digital and paperless, ensuring that your home buying experience is smooth from start to end.
Home Loan Deductions
The Income Tax Act allows deductions for home buyers if they have taken on a home loan. Interest paid on a home loan is income-deductible up to Rs 2,00,000 per year. Additionally, principal repayment made towards a housing loan (including the amount expended on registration charges) is deductible up to Rs 1,50,000 per year. So, a property owner occupying the house they bought using a home loan can claim up to Rs 3,50,000 per annum as income tax deductions.
Except for individuals with very high basic salary, HRA, and rent expenditure, a home loan is likely to provide more benefit from an income tax perspective. After all, buying a home leaves you with an asset. IDFC FIRST Bank provides home loans through instant loan app with interest rates as low as 6.90% and tenures as long as 30 years to facilitate homeownership for all. Our home loan application and approval process are entirely digital and paperless, ensuring that your home buying experience is smooth from start to end.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
