Buying a House is nowadays is not easy considering the multifold hikes in property price in last 10-12 Years. It becomes almost impossible for middle and lower class to buy an house and those buying the house also finds it difficult to buy the same from their own saving without obtaining a home loan. Home loan becomes necessity to Purchase a house.

In this article we will discuss the tax benefits which one can avail under the Income Tax Act,1961 on Purchase of House property  (Including the Expenses on Stamp Duty and Registration expenses) and on Repayment of Home loan (Including Interest).  We will mainly discuss the Tax benefit available mainly under Section 24(b), Section 80EE and Section 80C of the Income Tax Act, 1961.

1. Income Tax Benefit on Home Loan Interest under Section 80EE Of Income Tax Act 

Benefit of this section can be  availed by Individual assessee (Resident or Non Resident). Deduction under this section is not available for any other assessee (like HUF, firm etc.). Individual can claim benefit under this section only when all the following conditions are satisfied, these are-

  • The individual has taken laon for acquistion of residential house property
  • Value of the house should not more than 50 lakh.
  • Loan taken by Individual for the purpose of buy a house should not be more than 35 lakh.
  • On the date of sanction of loan individual does not have any own residential house property.
  • Loan for this purpose taken by individual should be from the bank/housing finance company
  • For this purpose, loan should be sanctioned between 01.04.16 to 31.03.17.

Assessee can take deduction under Section  80EE on interest payable on home loan upto Rs 50,000 in A.Y.207-18 and subsequent assessment years till the loan is repaid.

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2. Section 80C for Investment in Residential House Property and for payment of Principal amount

 The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest. The principal component of the EMI qualifies for deduction under Sec 80C.

Further Amount paid towards stamp duty, registration fees and other expenses for the purpose of transfer of house property to the owner also qualifies for tax exemption’. This is over and above the principal payment that qualifies under Section 80C. But deduction u/s. 80C for  total amount including Principal Loan Repayment and stamp duty and registration charges can not exceed Rs. One Lakh Fifty Thousand (Rs. One Lakh up to A.Y. 2014-15).

Section 80C provides that in computing the total income of an assessee, deduction shall be provided in respect of various payments/investments made as included in the Section 80C subject to a ceiling of Rs. 1.50 lakh on the aggregate amount of such payments/investments.

3. Section 24(b) -Deduction of Interest on Borrowed Capital From House Property income

This deduction is allowed only in case of  house property which is owned and is in the occupation of the person for his own residence. However, if it is actually not occupied by the one in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.

The quantum of deduction for home loan interest is as per table below:

Sl
No
Purpose of borrowing capital Date of borrowing
capital
Maximum Deduction
allowable
1 Repair or renewal or reconstruction of the
house
Any time Rs. 30,000/-
2 Acquisition or construction of the house Before 01.04.1999 Rs. 30,000/-
3 Acquisition or construction of the house On or after 01.04.1999 Rs. 2,00,000/- wef A.Y. 2015-16.Rs. 1,50,000/- up to A.Y. 2014-15

In case of Serial No. 3 above

(a) The acquisition or constructing of the house should be completed within 5 years (3 years upto A.y 2016-17 ) from the end of the FY in which the capital was borrowed.

(b) Further any prior period interest for the FYs upto the FY in which the property was acquired and constructed shall be deducted in equal installments for the FY in question and subsequent four FYs.

(c) The Assessee has to acquire before  a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of  Principal and Interest of the loan so repaid.

(Republished With Amendments)

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72 responses to “Income Tax Benefits from House Property and Loan”

  1. Devendra says:

    Sir,

    How can we calculate the exemption in respect of section 89 i.e relief for arrears of salary received

  2. Shekhar Srivastava says:

    I have taken 2 home loans.
    Can I get rebate of interest portion of both loan ,not exceeding beyond 2 lacs.

  3. mahendra says:

    Sir ,I have taken up a house loan for 32 L.My house has got completed in 2015 mar.I have also paid pre-emi int of Rs 5.5 L.I have claimed dedn on Pre -EMI int for FY 2015-16 and will get to claim for FY 2016-17.What about balance pre-emi int ,since the ceiling from FY 2017-18 will be 2 L?Will this 2L ceiling is for entire int component ie pre-emi and normal EMI or only normal EMI int?Please enlighten.Will I accrue loss for bal interest ie; pre-emi +normal emi,which is over 2L?

  4. sarma RV says:

    sir, i am 60 yers old and retired from pvt service, and had sold my old asset in oct’2016 and long term capital gain tax was indexed as Rs10,00 lakhs and now thinking to take another asset along with my son on sharing basis, as 50: 50 basis, for an estimated cost of Rs 50.00 lakhs.
    so i like to invest Rs25.00 lakhs and my son will go for a bank loan because he is working.
    so i like to know whether this way will it take care of my capital gain tax, please let me know.

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