India is a country in which everyone dreams to own his house. It is a huge investment which utilises a major part of income earned by a person. Considering this, the government has provided some deductions which help to reduce the Tax burden of the taxpayer.
There are various incentives which are provided under the Income Tax Act’1961. The repayment of housing loan consists of two components i.e. repayment of the principal amount and the payment of interest thereon.
Here, we have discussed the tax benefits available on repayment of principal and interest of home loan:
- Tax deduction on Home Loan Interest (Section 24)
This deduction is available for the self-owned property as well as let out property. The deduction under this section is available for the interest payable on the housing loan.
The owner of the self-occupied house can claim up to Rs. 2,00,000 as a deduction under this section for the interest on housing loan. If the purchase or construction is not completed within 5 years from the end of the F.Y. in which loan was availed the amount of deduction is restricted to Rs. 30,000.
However, there is no ceiling on the amount of deduction in case the property is not self-occupied.
2. Tax deduction on Principal Repayment (Section 80C)
The taxpayer can also claim the deduction up to Rs. 1,50,000 in respect of repayment of principal of housing loan. However, this deduction is allowed only after the construction of the house is complete.
The taxpayer claiming the deduction needs to satisfy the following conditions:
(a) The Home Loan must be for Purchase/ Construction of New House Property.
(b) The property must not be sold before the expiry of 5 years from the date of obtaining the possession.
3. Tax deduction for First Time Home Buyers (Section 80EE)
The deduction under this section is for the interest payment on the housing loan. The deduction is available up to Rs. 50,000 Per Financial Year. This deduction is over and above the deduction under section 24 & 80C.
This deduction is available subject to the fulfilment of the following conditions:
(a) The loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2016 and ending on the 31st day of March, 2017.
(b) The amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35 Lakhs.
(c) The value of residential house property does not exceed Rs. 50 Lakhs.
(d) The assessee does not own any residential house property on the date of sanction of loan.
(This blog is authored by CA. Tushar Mittal, Senior Tax Consultant)
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader. Before making any decision or taking any action, the reader should always consult a professional adviser relating to the relevant article posting.
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