- Deduction for house loan /installment available up to Rs.100000 /-
- The limit of one lac as above is total limit u/s 80C for all type of savings ,plus section 80CCC(pension policy) plus u/s 80CCD(Contributory Pension Plan).Means the aggregate amount of deduction under above referred sections can not exceed Rs. 1,00,000.
- The payment of loan should be made towards cost of purchase/construction of new residential house property.
- The house property income should be assessable in the hand of asseessee in simple term assessee should be the owner of the house property.
- The payment should not be for addition or alteration to,or renovation or repair of house property done after completion of house.
- Completion of house means
- completion certificate in respect of the house property by the authority competent to issue such certificate or
- house property or part has been occupied by the assessee or any other person on behalf of assessee or
- has been let out;
- Housing loan for more than one house can also be claimed.
- All the benefit of tax u/s 80 c will reversed if house property is sold with 5 year from purchase of house property
- The tax benefit under section 80C is available on residential house property only and not available on commercial house property.
- Loan should be taken from Specified institutions/deptt only given below
- Central or State Government
- any Bank including co-operative bank
- LIC or National Housing Bank
- public company formed and registered in India or co-operative society with main object to provide long term finance for construction purchase of houses in India.
- Assessee Employer if public company or public sector company or university established by law or a college affiliated to such university or local authority or co-operative society.
- The benefit is available only to Individual assessee and to HUF assessee.
- The above benefit is available even assessee already has another house property.
- The benefit is available on payment basis ,no matter to which year payment is relates to or payment overdue or not.
- From total amount of installment paid of house loan reduce amount availed under deduction section 24.(INTEREST)
- The Benefit under this section is available whether residential house property is rented or self occupied,but it should be completed as define above by end of the previous year in which loan is repaid.
- Pre EMI are also eligible for deduction if house property is completed by the end of previous year.
- Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee is also eligible for deduction under this section even assessee has not taken any loan .
- There is no requirement that for loan ,house property should be mortgaged to the institution from which the loan has been taken ,but it should be used for the purpose of purchase /construction of house property.
Deduction for house loan
1. Tax deductions for House under-construction
Can you claim tax benefits for home loan taken for under-construction house ? A lot of investors assume that they can claim tax deductions and without doing much research, they go ahead with the loan. However they should know the fact that claiming tax in case of under-construction house is different. You cannot claim the tax deductions for the principal amount for under-construction house. You need to have possession and certificate of ownership to claim tax under 80C. However Interest part is little different. You can not claim the interest amount, unless you get the possession of house . However you can always claim the deductions later in 5 equal installments for next 5 yrs from the end of financial year of possession.
Example : Suppose Ajay bought a house on loan on 5th June 2010 and he pays total 4 lacs as interest in next 2.5 yrs and gets possession on 7th Nov 2012 . He will be able to claim this 4 lacs Rs in equity installments in the next 5 yrs period , which is 80,000 per year in 2013 – 2017 . However the total limit for exemption will still be 1.5 lacs per year.
2. Selling the House before 5 yrs reverses the tax saved earlier
We think of saving tax, but once the tax is saved for a particular year, it does not mean the story ends here. The tax benefit under sec 80C is allowed for home loans considering the condition that it wont be sold before 5 yrs from the date of purchase. Read some nice tips for house buying from real buyers
If you sell your house before the expiry of 5 yrs, all the money you saved under sec 80C in earlier years will be deemed to be your income in the year of sale and added to your salary. For example, if you bought the flat in Oct 2010 and in next 4 yrs you saved 1 lac in tax under sec 80C, then this 1 lac will become your income in the year of sale and will be taxed . However interest component once saved is saved and it wont be reversed.
The tax benefit under section 80c is allowed subject to the condition that house property should not be sold before a period of 5 years. If you sell the house before the expiry of five years from the end of the financial year in which you obtained the possession, the deduction will be discontinued and the entire tax deduction claimed in earlier years under section 80c – for repayment of principal component of the home loan – will be deemed to be your income (in addition to capital gains) in the year in which you sell the property. However, the housing loan interest deduction claimed under section 24(b) won’t be reversed.
3. Loan taken from Friends and Family is eligible for Deductions (Interest)
Incase you want to take loan from your friends , parents or any other person , you can still claim the interest on the loan under sec 24 , which is upto 1.5 lacs per year . However you can not claim the principal amount under sec 80C, that’s applicable only if you take up the loan from some Bank or financial institution . So you don’t always need to take the loan from Bank. if you can take it from a friend or Family , you can still claim tax deductions on Interest part .
4. 80C is not allowed for loans taken for Extension or Renovation of House
If you take a loan for extension or renovation of your existing house, in that case you can not claim the principal part under sec 80C, but you will be able to claim interest amount under sec 24, but the limit in this case is only upto Rs 30,000 for self-occupied properties. However for houses which are let-out (rented or second home which is not occupied) , there is not limit for tax deduction.
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