Income Tax: Tax Benefits of Housing Loan in India
Any tax benefit on housing
loan is covered under section 24, 80C and 80EE of the income tax act, 1961.
The
important matter to be kept in mind is the tax benefit of housing loan when a
person takes a housing loan. Thus, there are different sections available for
taking tax benefit on housing loan and this benefit are claimed as a tax
deduction at the time of filing of the income tax return. The repayment of the
amount of housing loan is to be divided into 2 components:
-
Repayment of principal amount
-
Repayment of the interest on home loan
Ø Section - 80C :- income tax benefit on home loan (principal
amount)
When
an INDIVIDUAL or HUF made the repayment of the principal amount of home loan,
the deduction is allowed under section 80C up to a maximum of Rs. 100000/-
only. However, the available tax benefit under this section is allowed only if
the construction is complete and the completion certificate has been awarded.
No deduction is allowed for repayment of the principal amount for those years
in which the property is under construction.
The
deduction of Rs. 100000/- is the total deduction available under section 80C
i.e., PPF account, Equity oriented MFs, Tax saving fixed deposits etc. are
included for deduction under section 80C. If the assesses has not taken a loan,
but paid stamp duty and registration fee then, it can be claimed as deduction
under section 80C.
Ø Section - 24 :- income tax benefit of interest on home loan
Under
section 24, the interest paid on housing loan is to be reduced from the income
from house property when the loan has been taken for the purpose of purchase or
construction or repair of the housing property.
The
maximum deduction limit of Rs. 150000/- is available for a self-occupied
property under this section. However, the property for which the loan has been
taken is not the self occupied property of the assesses then there is no
maximum limit is applied and he/she can claim the deduction for the whole
amount. The benefit of deduction of interest on housing loan of Rs. 100000/- is
to be reduced to Rs. 30000/- only if the construction of such property is not
completed within 3 years from the end of the financial year in which the loan
was taken.
While
taking the benefit of deduction under section 24, the following important
points must be taken into consideration:
I.
Interest paid on outstanding amount is not allowed as a tax
deduction.
II.
Any deduction cannot be claimed for a commission paid for
arranging the loan.
III.
If the person acquired or constructed the property with
borrowed funds, then he/she can claim the deduction of interest on a home loan.
IV.
This tax deduction is to be available to the assesses only if
the construction is completed within 3 years from the end of the financial year
in which the capital is borrowed.
Ø Section - 80EE :- income tax benefit of interest on home loan
(first time buyer)
While
the budget 2013 has been announced by P. Chidambaram, a new section in the
income tax act is included known as section 80EE. This section provides
additional tax deduction of Rs. 100000/- to the first time home buyers with the
following conditions:
I.
The loan is to be sanctioned between 1st April,
2013 and 31st March, 2013.
II.
The amount of the loan does not exceed Rs. 2500000/-.
III.
On the date of sanction of loan, the assesses does not own
any house property.
·
Available deductions in
all of the 3 sections –
Particulars
|
Quantum
of deduction
|
|
Self-Occupied
property
|
None
Self-occupied property
|
|
Section
24
|
150000
|
No
limit
|
Section
80C
|
100000
|
100000
|
Section
80EE
|
100000
|
100000
|
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