Income Tax Benefits Available On Hosing Loan

Government has provided various tax benefits to assessee on hosing loan. Income Tax Act provides tax benefits on repayment of principal component of loan as well as on repayment of interest component of loan.

Deduction under section 24(b)

(A) In respect of let-out property, actual interest incurred on capital borrowed for the purpose of acquisition, construction repairing, re-construction shall be allowed as deduction

(B) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of acquisition or construction of house property shall be allowed as deduction up to Rs. 2 lakhs. The deduction shall be allowed if capital is borrowed on or after 01-04-1999 and acquisition or construction of house property is completed within 5 years.

(C) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of reconstruction, repairs or renewals of a house property shall be allowed as deduction up to Rs. 30,000.

* Any interest pertaining to the period prior to the year of acquisition/ construction of the house property shall be allowed as deduction in five equal installments, beginning with the year in which the property was acquired/ constructed.

* Deduction for interest on borrowed capital shall be limited to Rs. 30,000 in following circumstances:

a) If capital is borrowed before 01-04-1999 for the purpose of purchase or construction of a house property;

b) If capital is borrowed on or after 01-04-1999 for the purpose of re-construction, repairs or renewals of a house property;

c) If capital is borrowed on or after 01-04-1999 but construction of house property is not completed within five years from end of the previous year in which capital was borrowed.

With effect from Assessment Year 2020-21, deduction for interest paid or payable on borrowed capital shall be allowed in respect of two self-occupied house properties. However, the aggregate amount of deduction under this provision shall remain same i.e., Rs. 30,000 or Rs. 2,00,000, as the case may be.

Deduction Under Section 80EE

Deduction of up to Rs 50,000 or interest payable on hosing loan whichever is less shall be allowed to an Individual for interest payable on loan taken for the purpose of acquisition of a house property subject to following conditions:

a) Loan has been sanctioned by Financial institution during the financial year 2016-17;

b) The amount of loan sanctioned does not exceed Rs 35,00,000;

c) The value of residential property does not exceed Rs 50,00,000;

d) The assessee does not own any residential house property on the date of sanction of loan;

e) Where deduction has been allowed under this section, no deduction shall be allowed in respect of such interest under any other provision.

Deduction under section 80EEA

(1) In computing the total income of an assessee, being an individual not eligible to claim deduction under section 80EE, there shall be deducted, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.

(2) The deduction under sub-section (1) shall not exceed 150000 and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2020 and subsequent assessment years.

(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:—

(i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st March 2022

(ii) the stamp duty value of residential house property does not exceed forty-five lakh rupees;

(iii) the assessee does not own any residential house property on the date of sanction of loan.

(4) Where a deduction under this section is allowed for any interest referred to in subsection (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.

Deduction Under Section 80C

A) Deduction under this section is available on repayment of principal amount of hosing loan.

B) Section 80C also provides deduction on Stamp duty and registration charges paid on purchase of property Maximum deduction available under this section is 150000.