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Income Tax Benefits Available On Housing Loan

Government has provided many tax benefits to assessee on home loan. Income Tax Act provides tax benefits on repayment of loan’s principal component as well as on repayment of loan’s interest component.

Deduction under section 24(b)

  • For let-out property, actual interest made on capital borrowed for the purpose of housing property’s acquisition, repairing, re-construction will be allowed as deduction.
  • For self-occupied residential house property, interest incurred on capital borrowed for the purpose of acquisition or construction of house property shall be allowed as deduction up to INR 2 lacs. If capital is borrowed on or after 01 April 1999 then deduction will be allowed & house property’s acquisition or construction is completed within 5 years.
  • For self-occupied residential housing property, interest made on capital borrowed for the purpose of house property’s reconstruction, renewals or repairs will be allowed as deduction up to INR 30 thousands.

Income Tax Benefits on Hosing Loan

  • Any interest related to the period prior to the year of house property’s acquisition or construction shall be allowed as deduction in 5 equal installments, beginning with the year in which the housing property was constructed or acquired.
  • On borrowed capital, deduction for interest will be limited to INR 30 thousands in following circumstances:
  • If capital is borrowed before 01 April 1999 for the motive of house property purchase or house property’s construction;
  • If capital is borrowed on or after 1st April 1999 for the motive of house property’s re-construction, repairs or house property’s renewals;
  • If the capital is borrowed on or after 1st April 1999 but housing property’s construction is not completed within 5 yrs. from end of the previous year in which capital amount was borrowed.

With effecting from AY 2020-21, interest paid deduction on borrowed capital will be allowed in respect of 2 self-occupied housing properties. However, under this provision the aggregate amount of deduction will remain same which is INR 30 thousands or INR 2 lacs as the case may be.

Deduction under Section 80EE

Deduction of up to INR 50 thousands or interest payable on housing loan whichever is less shall be allowed to an Individual for interest payable on loan taken for the purpose of house property’s acquisition subject to following conditions:

  • Loan has been sanctioned through Financial institution during the FY 2016-2017;
  • The loan amount sanctioned doesn’t exceed INR 35 lacs;
  • The value of residential property does not exceed INR 50 lacs;
  • The assessee doesn’t own any residential house property on the loan sanction date;
  • If the deduction has been allowed under this section, then no deduction shall be allowed for such interest under any other provision.

Deduction under section 80EEA

  1. In calculating an assessee’s total income of, being an individual not eligible to claim deduction under section 80EE, there shall be deducted, interest payable on loan taken by him/her from any financial institution for the purpose of residential house property’s acquisition.
  2. The deduction made under sub-section (1) will not exceed INR 1.50 lacs and will be allowed in calculating the individual’s total income for the AY beginning on the 1st day of April, 2020 and subsequent AY.
  3. The deduction under sub-section (1)will be subject to the following conditions, such as:—
    1. The loan has been sanctioned through financial institution during the period which begin on the 1st April, 2019 & end on the 31st March 2022.
    2. The residential house property’s stamp duty value does not exceed INR 45 lacs;
    3. The assessee doesn’t own any residential house property on the loan sanction date.
  4. If a deduction under this section is allowed for any interest referred to in subsection (1), no other deduction will be allowed in respect of such interest under any other provision of this Act for the same AY or any other AY.

Deduction under Section 80C

  • Deduction under this section is available on repayment of hosing loan’s principal amount.
  • Section 80C also provides deduction on Stamp duty and registration charges paid on purchase of property Maximum deduction available under this section is 1.50 lacs.