Follow Us :

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.

ID-100235532

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

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)

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

72 Comments

  1. 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?

  2. 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.

  3. Prakash says:

    Dear Sir,

    I am a regular reader of your blog and find it very helpful for tax planning and investments. I have a doubt.

    I am a Govt employee. My gross salary for FY 2015-16 is Rs. 4,60,000/-. The mandatory deduction for NPS from my salary is Rs. 46,000/- and the same matching amount is contributed by the employer. I have also invested Rs. 1,40,000/- in PPF and ELSS funds. Please tell me how much deduction can I claim:-

    (1) Only Rs 1,50,000/- under Section 80C or

    (2) Rs. 1,40,000/- under Section 80C + Rs. 46,000/- under Section CCD (1B) i.e. total Rs. 1,86,000/-

    Your guidance will be very helpful to me.

    Thanks!

  4. SYEDA ALIYA says:

    i have taken loan for house construction on july 2016 but not yet finished construction and EMI also not started. my doubt is that can i enclose the interest on loan which is to be calculated. can i show this in IT

  5. ROSHAN LAL says:

    I HAVE BOOKED A RES.FLAT IN UNDER CONSTRUCTION PROJECT. IN OCT 12 AND TAKEN A LOAN DURING APR 2013.POSSESSION NOT YET GIVEN .i AM PAYING EMI SINCE SEP 2015 rS. 13000/-pm.
    WHAT ABOUT TAX REBATE FOR PRINCIPAL & iNTEREST

  6. krishna says:

    Sir / Madam,

    I am paying interest to my home loan. But I am getting some rent to the same house. I am submitting the same Income tax to my rent amount. Is there any posibility to save my bank interest in my case.

  7. Omparkash says:

    मेरी पत्नी के नाम प्लाट की रजिस्ट्री है वह ग्रहणी है।हमने मकान बनाने के लिए इकट्ठा लोन लिया है। मै सहकारी मिल मे नोकरी करता हूं।मेरी पत्नी कही से कर लाभ नही ले रही। मुझे कर लाभ कितना मिलेगा ।

  8. Vibhor says:

    Hi
    I had taken Loan in 2009 for construction of house in Jaipur which is going to over in the month of Nov 2016 and at present i am posted at Raipur
    -can i get second loan in raipur for purchase of new prop.
    -can i get second loan in jaipur for construction/ repair of my old house .
    please let me know how can i save my Tax in respect of HL

  9. manoj says:

    Hi, I’ve two properties in NCR while I work in Bangalore…Can I claim all three- HRA, Self occupied Interest loss and Let out interest loss with rental income?

  10. bhupendra says:

    Dear Sir,

    I am Bhupendra Patel, working with Mahindra & Mahindra Ltd,Pune

    During 2015-2016 period, my employer consider loss of property -55906 (property located at my native place,

    Loan starting from 2010)while preparing the form 16,

    I am also purchase the flat,@Oct-2013,and paid Pre Emi intrest as below,and I am getting possession in March-2016

    2014-2015 – 94,990(Pre EMI)

    2015-2016 -2,29,950(Pre EMI)

    2015-2016 – Principal -6622

    Interest-21582

    Can I claim amount as below,if yes ,in which column I have to fill up during return file

    2014-2015 Pre EMI Equally divided into 5 is – 18998

    2015-2016 I claim full as a get possession in march 2016 -2,29,950

    Total- 2,48,948

    Regards,

    bhupendra

  11. Abhijit says:

    Hi, Thanks for educating. I am paying yearly interest of approx 2.5 lakh and have a

    pre -possession interest divided into equal five parts which comes to 50,000. Which means i am eligible for 3 Lakh. Will i get a Tax rebate of 3 Lakh or 2 Lakh ?

  12. Ramalakshmi K says:

    Hi,
    I made home loan re-payment of 8 lakhs this month. I can show 1.5L for tax exemption under 80C. Is there any way to show the rest 6.5 L under any other section for tax exemption?

    Please advise..

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
March 2024
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031