The Government is encouraging Individuals to invest in House Property and providing greater benefits to them by giving tax relaxation. If you are planning to buy a new house then it would be wise to go for housing loan even as it helps you to save tax on income. Payment of housing loan gives you an opportunity to save taxes by claiming benefit of both Interest as well as Principal repayment of the Housing Loan when you go for e-filing of tax returns. The Income Tax Act provides deduction under section 80C against Principal Repayment and exemption under Section 24(b) on Interest payment of Housing Loan.

There are 2 possible situations which would determine how you can claim the tax benefits. A Housing loan can be obtained against a property whose possession is received or is yet to be received as it is being constructed.

Housing Loan taken and possession received in the same year.

Housing Loan can be taken for purchasing or constructing a new house property. When a loan is taken in the same year in which the house property is purchased or constructed, one can enjoy the tax benefits on payment of both principal and interest component of the housing loan.

Principal: The repayment of principal component of housing loan is entitled for exemption under 80C up to Rs. 150,000 along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc. 80C deduction for principal repayment of housing loan is allowed as soon as you start repaying the loan. This tax benefit can be claimed irrespective of the fact that the property is being self occupied or let out.

For claiming such deduction there are certain requirements to be fulfilled i.e. principal repayment will be considered for deduction only if the loan is not taken for improvement, extension, renovation or alteration of an existing house. Further, it cannot be claimed if an individual has taken home loan from relatives or friends or from any other source, which is not mentioned as Specified Institution/Department.

Interest: Section 24(b) of Income Tax Act entitles you to claim exemption on interest payment of housing loan against the property purchased or constructed. The benefit can only be taken from the year in which the possession has been received. The actual interest payable is allowed as deduction subject to maximum of Rs. 200,000 for a Self-Occupied property. In the case of Let-Out property, there is no maximum limit and the entire amount of interest payment can be taken for tax benefit.

If the fresh loan has been raised to repay the original loan and the new loan has been used only for the purpose of repaying the original loan then the interest paid on such fresh loan is also allowed as deduction. Penal interest on housing loan shall not be allowed as deduction. If the purchase price of the property is paid in installments with interest, the interest portion of the installment is an allowable deduction under Section 24.

Housing Loan taken but possession received next year or later.

Often it is seen that housing loan is taken but the possession of the property is received in the next or later financial year. It may be because the property is not completed or constructed. Tax benefits of housing loan can still be enjoyed but there are certain restrictions to it.

Principal: Till the house is not constructed and the possession is not taken over, deduction on house loan principal repayment is not allowable. You need to have possession and certificate of ownership to claim tax under section 80C. In simple words it is said that you should be the owner of the house property. After the possession is received, the deduction can be claimed normally up to a maximum of Rs. 1.5 Lakhs under section 80C.

Interest: The interest deduction u/s 24(b) can be claimed after the possession of the house property is taken over. However, the total amount of interest paid on home loan prior to possession of house property as can be claimed as pre-construction interest in 5 equal installments for next 5 years from the financial year in which possession is received. The pre-construction interest is allowed upto a limit of Rs 2 Lakhs including the current year interest payment on home loan. This can be claimed only after the house is ready and possession is taken over. If the house has been let out, the taxpayer can claim the entire interest component as deduction from the rental income without any restriction.

Kindly Note in respect of set-off and carry forward of losses there are some recent changes :

With effect from financial year 2017-18 Govt has restricted the limit of set off of loss from house property against other heads of Income to Rs. 2 Lakh. Till financial year 2016-17 there was no restriction and assessee was allowed to set-off any loss from house property against other heads of Income. Please note the restriction is placed on set-off of losses and not on the amount of home loan interest that can be claimed as a deduction under Section 24 for a rented house property, the losses which could arise on account of such interest repayment can be set off only to the extent of Rs 2 lakhs. Such loss in excess of Rs. 2 Lakh can be carried forward for upto 8 Assessment Years succeeding the year of loss and can be set off against Income under the head House Property.

(Republished With Amendments)

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Tags : Budget (1960) Budget 2014 (172) Housing Loan (38) Income Tax Deductions (439) section 24 (59) Section 80C (163)

10 responses to “Double Benefit on Taxes on Housing Loan”

  1. Anany Goel says:

    no. tax exemption only allowed to you and not your son as the property is in your name. no certificate would help

  2. Anany Goel says:

    yes you can.. u/s 24 their is no requirement of possession upto 5 years so you can claim rs 58000 deduction pa for next 4 years

  3. Anany Goel says:

    yes under the head income from house property

  4. Anany Goel says:

    incomplete details

  5. Anany Goel says:

    for renovation no benefit u/s 80c and you can claim deduction of upto rs 30000 u/s 24

  6. Anany Goel says:

    although opinion of various consultants is divided in this matter, but in my opinion yes you can

  7. Anany Goel says:

    you will not be entitled to any benefit as only a owner/co-owner is entitled to benefits in income tax act.

  8. Mohamed says:

    please give a clear details about housing loan tax benefit details. because i urgently need to take house property loan for construction of our home. but house property documents are only in my father name. If i took house property loan can i claim house property interest and principal??????? please give your valuables suggestion for my clearance..

  9. adi says:

    Can I get tax savings for the amount that I pay for prepayment of principal amount

  10. S. P. Gupta says:

    I have taken loan against property which is fully repaid. Again I want to take loan on that property as renovation loan. Can I claim the deduction u/s 80C and exemption u/s 24(b) of Income Tax Act.

    Further If I have 2nd house the value of which is less than 30L and not given on rent.

    Pls suggest.

  11. Vijay bamrara says:

    I had taken home lone in 2011 and this year i paid 170000 as interest. How much rebate i got this year.

  12. Vijay bamrara says:

    I had taken home lone in 2011 and this year i paid 170000 as interest. How much rebate i got.

  13. sudhir k says:

    can i claim Income tax exemption for House Property tax i had paid?

  14. kiran says:

    I Have Purchased Under Construction Flat In Dec-2011 And I Got Possession Of The Same In May 2014. My Total PRE EMI Interest Amount Is 290000. So I Am Supposed To Claim 58000 Per Year For Income Tax Rebate For Five Years. But I Am Selling My Flat Now In April 2015 To Purchase Another Big Home In Different City. I Want To Know Whether I Can Still Claim 58000 Per Year For Tax Rebate For Next Four Years, As I Have Paid This Interest Earlier??

  15. T RENGARAJU says:

    I HAVE TAKEN HOUSE LOAN ON MY NAME, SINCE THE PROPERTY IS ON MY NAME, KINDLY CLARIFY MY SON IS ELIGIBLE TO CLAIM TAX EXEMPTION OR NOT, INCASE IF HE CLAIM AHT TYPE OF CERTIFICATE TO BE ISSUE TO HIM BY ME.

  16. RAVINDRAN S says:

    I have availed housing loan on september 2014. I have occupied the house on 2nd march 2015 as the building completion is over. My emi Rs. 11644 started on 31/03/2015.
    Even though I have paid Rs.17000 during the financial year the bank appropriate
    RS.11644 and kept the balance amount RS. 5356 as advance payment for the loan.
    From the loan account statement I came to know that out of RS.11644 they have
    adjusted RS.3822 towards principal and RS. 3822 and interest is Rs. 7822 and kept
    RS. 5386 as advance payment. The total interest payable during the financial
    yrar 2014-15 is RS. 45146. kindly inform be how much I am eligible for income tax rebate under section 80 C and Section 24

  17. kamlakar bhangale says:

    I hv taken 2 home loan from sbi, one is property purchase and another HL for constructing same property, now I m residing in this house since 2 yrs, can anyone tell me. can i take IT benefit for dual home loan. 9823842721

  18. pritesh patel says:

    Sir, I have two home loans, one loan which I have taken of home in Surat where my brother stay. Second home is now ready in Ahmedabad and will get possession at 15 march of running year. Can I get tax exemption on both home loans. Also can I get tax exemption of stamp duty and registration charge which I will be paying in running month. Can I also claim for rent which I paid for 1 year in ahmrdabad.

  19. Sachin chaudhari says:

    Sir I took home loan and paying emi. For year 2013-14 I have interest of 218350 and principle is 1,19,234. I hv given this house on rent of rs 15000 per month which is deposited in my account. I hv investment of rs 1,12,500.00 in 80 c. Now how these home interest and principle amount can give benefit to me. Also how the income of this house rent will be reflected.

  20. sudeep says:

    Sir

    If me and my friend purchase a Home with 50 -50 Contributuin and Property is registered jointly with our name , will we get the Tax benefit same way

    Please suggest

    Many Thanks
    Sudeep

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