There
are various ways to save tax by taking housing loan. We can take tax benefit on
housing loan under section 80C, section 80EE and section 24.
1.
Benefits
under section 80C:
- The said deduction is available to Individual
and Hindu Undivided Family. - Section 80C provides deduction for payment of
installment on repayment of housing loan. The Installment consists of principal
amount and interest amount. Only principal amount is deductible under section
80C. Loan can be taken from Nationalized, private or co-operative bank.
Deduction is also available even if loan is taken from Life Insurance Corporation,
National housing Bank, taxpayer’s employer where such employer is public
company, university or co-operative society. - The Stamp Duty and Registration Fees paid are
also allowed as deduction under section 80C. Kindly note that deduction of
stamp duty and registration fees is available even though taxpayer has not taken
housing loan. - The deduction is available on the payment
basis. If installment is due but not paid during the financial year by taxpayer
then he cannot claim deduction. But he can claim deduction in the financial year
in which he actually paid the installment amount.
§ What is the maximum limit of deduction u/s 80C?
The maximum deduction allowed u/s 80C is
Rs.1,50,000. (This limit is applicable form financial year 2014-2015, earlier limit
was is Rs.1,00,000) Kindly note that this deduction is the total of deduction
allowed u/s 80C and includes amount invested in Provident Fund A/c, Tax saving
Fixed Deposits, National Saving Certificates etc.
Shall I buy partly-constructed
house property or fully constructed property?
Deduction
of home loan u/s 80C for repayment of principle part of home loan is allowed
only after the construction is complete and the completion certificate has been
awarded by local authority. No deduction would be allowed under this section
for repayment of principal for those years during which property was under
construction.
There
are two benefits of purchasing fully constructed property.
1.
Service tax is not levied on the property which is
constructed fully.
2.
You can take the deduction of principal amount of your
installment immediately after the repayment of installment amount.
There
are also two benefits for purchasing partly-constructed property.
1.
Price of party constructed property is less than fully
constructed property.
2.
You need not required to pay whole amount of the property at
the time of acquisition of house property.
§ Is there any circumstance, the effect of
which will be the withdrawal of deduction u/s 80C?
If taxpayer transfers the house property on which he has claimed tax deduction u/s 80C
before the expiry of five years from the end of the financial year in which the
possession has been obtained by him, then no deduction on home loan shall be
allowed u/s 80C. In such case, the aggregate amount of tax deduction already
claimed in respect of previous years shall be deemed to be the income of
taxpayer of the year in which the property has been sold & taxpayer shall
be liable to pay tax on such income.
2.
Benefit
under Section 24:
This section provides tax benefit on home loan for payment of
interest on such housing loan under the head ‘Income from House Property’, where
the loan has been taken for the purpose of purchase / construction / repairs /
renewal or re-construction of a residential house property.
§ What is the limit of deduction u/s 24?
In
case of self-occupied property (which is neither let out
nor put to any other use) by the owner, the maximum limit of deduction is Rs.
2,00,000 (This limit is applicable form financial year 2014-2015, earlier limit
was is Rs.1,50,000).
What
are the conditions for claiming the deduction up to Rs. 2,00,000?
Deduction is only available if following three conditions are satisfied
1.
Loan is taken on or after 1st April
1999
2.
The acquisition or construction should be completed within
three years from the end of the financial year in which the loan is taken
3.
Loan should be taken for the purchase or construction of
house property. (Loan should be not taken for repairs or re-construction of house
property)
If above conditions are not satisfied and loan is taken for purpose
of purchase / construction / repairs / renewal or re-construction of a
residential house property then deduction is available only to the extent of Rs.
30,000.
- Is
deduction available if house property is not self-occupied:
There
is no limit for deduction of interest in case of property which is not self
occupied. In other words, the taxpayer can claim the deduction of any amount of
interest without any ceiling limit if the property is let out.
Please note:
·
If the taxpayer is having more than one house properties, one
of those properties is assumed as self-occupied as per the choice of taxpayer
after taking into consideration tax saving & other properties are treated
as “Deemed to be Let-Out”.
- How
the provisions of section 24 are applicable in case of Interest on
Pre-Constructed Property?
In
many cases amount for purchase of property is paid even before the construction is completed. Some people may purchase property even before the construction is
completed. In such cases:
Ø If the loan is taken for Repairs/ Renewal/ Re-construction:
No tax deduction is
allowed for interest paid before completion.
Ø If
loan is taken for the Purchase/ Construction:
The
interest payable by the taxpayer in respect of funds borrowed before the year in
which the property has been acquired or constructed will be deducted in five
equal installments, commencing from the year in which the house is acquired or
constructed.
For
this purpose, “pre-construction period” means the period commencing on the date
of borrowing and ending on (a) 31st March immediately prior to the
date of completion of construction or date of acquisition (b) date of repayment
of loan, whichever is earlier.
3.
Benefit under Section 80EE: (If loan is
sanctioned in the financial year 2013-2014)
This is the new section inserted in the Income Tax Act applicable
from financial; year 2013-14, which provides additional tax deduction of Rs.
1,00,000 to the first time homebuyers in respect of interest on home loan.
- Which conditions are to be satisfied for getting deduction
u/s 80EE?
a) The assessee is an individual.
b) He has taken a loan from a financial institution. Financial
Institution is a bank or a house finance company (i.e. an Indian Public Limited
Company formed with the main object of carrying on business of providing long term
finance for construction or purchase of residential houses in India).
c) The loan has been sanctioned by the financial institution
during the financial year 2013-14
d) The amount of loan sanctioned for acquisition of residential
house property does not exceed Rs. 25 Lakh.
e) The value of residential house property does not exceed Rs.
40 Lakh.
f) The assessee does not own any residential house property on
the date of sanction of loan.
After knowing the conditions of section
80EE, let’s know the amount of deduction:
If
the above conditions are satisfied, interest payable for the year 2013-14 on the
loan shall be deductible for the financial year 2013-14 up to maximum of Rs.
1,00,000. However, if the interest payable during the year 2013-14 is less than
Rs. 1,00,000, then balance amount shall be allowed as deduction in the financial
year 2014-15.
For
e.g the interest payable for the year 2013-14 on loan is Rs. 75,000, it is
deductible fully in the financial year 2013-14, and the balance amount of Rs.
25,000 will be deducible in financial year 2014-15.
Kindly note
that if deduction is claimed under section 80EE then no deduction will be
allowed in respect of such income under any other provision of the act for the
same or any other financial year.
Whether HRA exemption is available along with deduction under section 80C?
If taxpayer is living in a rented premise and is claiming
the exemption of House Rent Allowance even then he can claim tax benefit u/s
80C, 80EE and 24, subject to the applicable conditions. However, it is to be noted that, Where the
employee has not actually incurred expenditure on payment of rent or stays in
his own accommodation, no exemption on HRA is available.
- Whether
the above tax deductions u/s 24, 80C, 80EE can be claimed separately if the
property is purchased jointly or joint home loan has been taken?
Yes.
It is possible. Each person repaying the amount would be eligible to claim
whole deduction separately, to the extent of his respective share in the house
and the loan. The joint home loan is given only to married couples or blood
relatives such as parents and children.
