House loan repayment exemptions
This query is : Resolved
27 May 2015
Dear Experts,
I have purchased under construction property/flat and have taken house loan.
can i claim for deduction on repayment of Principal and Interest part
Pls suggest of the same. and what are the rules for above.
Thanks
I have purchased under construction property/flat and have taken house loan.
can i claim for deduction on repayment of Principal and Interest part
Pls suggest of the same. and what are the rules for above.
Thanks
27 May 2015
In My Opinion,
if it is self occupied property u can claim deduction of interest of Rs. 150000/- u/s 24(b), and deduction of 150000/- (Principal Portion) u/s 80C.
if it is self occupied property u can claim deduction of interest of Rs. 150000/- u/s 24(b), and deduction of 150000/- (Principal Portion) u/s 80C.
27 May 2015
Dear Sir,
It is not self occupied, i am rented with other location.
It is not self occupied, i am rented with other location.
27 May 2015
any more ans of the same issue?
28 July 2024
Yes, you can claim deductions for both principal repayment and interest on a house loan for an under-construction property, even if the property is not self-occupied. Here’s a breakdown of how you can claim these deductions and the rules governing them:
### **1. Interest on House Loan**
**Section 24(b) of the Income Tax Act:**
- **Deduction for Interest:**
- You can claim a deduction of up to ₹2 lakh per financial year on the interest paid on a home loan under Section 24(b) if the property is self-occupied or deemed to be self-occupied.
- If the property is rented out or deemed to be rented out, you can claim a deduction for the entire amount of interest paid, without any upper limit.
- **Interest During Construction Period:**
- Interest on the home loan paid during the period of construction can be claimed as a deduction in five equal installments starting from the year in which construction is completed and possession is taken.
- For example, if your construction is completed in FY 2023-24, you can start claiming the interest in FY 2023-24 and continue to claim it in the subsequent four financial years.
**Example Calculation:**
- **Interest Paid:** ₹3,00,000 in a financial year.
- **Claimable Amount:** ₹2,00,000 (if the property is self-occupied or deemed to be self-occupied). If rented out, you can claim the full ₹3,00,000.
### **2. Principal Repayment**
**Section 80C of the Income Tax Act:**
- **Deduction for Principal Repayment:**
- You can claim a deduction up to ₹1.5 lakh per financial year on the principal repayment of the home loan under Section 80C. This is part of the overall limit of ₹1.5 lakh for deductions under Section 80C, which includes other items like Life Insurance Premium, Employee Provident Fund (EPF), Public Provident Fund (PPF), etc.
- **Principal Repayment During Construction:**
- Principal repayments made during the construction period can be claimed as a deduction under Section 80C, provided that the property is not sold before the completion of the construction.
**Example Calculation:**
- **Principal Repayment:** ₹1,00,000 in a financial year.
- **Claimable Amount:** ₹1,00,000 (subject to the overall limit of ₹1.5 lakh under Section 80C).
### **3. Property Not Self-Occupied**
- **Self-Occupied Property:**
- For self-occupied properties, the maximum deduction for interest under Section 24(b) is ₹2 lakh.
- **Rented Property:**
- For properties rented out, or if deemed to be rented out (e.g., vacant but not occupied by the owner), you can claim the entire amount of interest as a deduction.
- However, you will need to declare the rental income from such properties and deduct the municipal taxes and interest paid on the loan while calculating the taxable rental income.
### **4. Documentation and Filing**
- **Maintain Records:**
- Ensure you maintain all documents related to the loan, including the loan agreement, repayment schedules, and statements of interest and principal repayments.
- Keep proof of possession and construction completion dates for accurate claims.
- **Tax Filing:**
- When filing your Income Tax Return (ITR), ensure you fill in the appropriate sections for claiming these deductions. For interest, it will be reflected under “Income from House Property,” and for principal repayment, it will be under “Deductions under Chapter VI-A.”
### **5. Important Considerations**
- **Claiming Interest During Construction:**
- Ensure you keep track of the period of construction to claim interest correctly in installments.
- **Tax Audit Considerations:**
- If your tax filings are subject to an audit, ensure that all claims and documentation are in order to substantiate your claims.
### **Summary**
- **Interest on the home loan:** Up to ₹2 lakh per year for self-occupied property; no limit if rented out.
- **Principal repayment:** Up to ₹1.5 lakh per year under Section 80C, irrespective of the property being rented or self-occupied.
For specific cases or complex scenarios, consulting a tax professional or chartered accountant can provide tailored guidance and ensure compliance with current tax laws.
### **1. Interest on House Loan**
**Section 24(b) of the Income Tax Act:**
- **Deduction for Interest:**
- You can claim a deduction of up to ₹2 lakh per financial year on the interest paid on a home loan under Section 24(b) if the property is self-occupied or deemed to be self-occupied.
- If the property is rented out or deemed to be rented out, you can claim a deduction for the entire amount of interest paid, without any upper limit.
- **Interest During Construction Period:**
- Interest on the home loan paid during the period of construction can be claimed as a deduction in five equal installments starting from the year in which construction is completed and possession is taken.
- For example, if your construction is completed in FY 2023-24, you can start claiming the interest in FY 2023-24 and continue to claim it in the subsequent four financial years.
**Example Calculation:**
- **Interest Paid:** ₹3,00,000 in a financial year.
- **Claimable Amount:** ₹2,00,000 (if the property is self-occupied or deemed to be self-occupied). If rented out, you can claim the full ₹3,00,000.
### **2. Principal Repayment**
**Section 80C of the Income Tax Act:**
- **Deduction for Principal Repayment:**
- You can claim a deduction up to ₹1.5 lakh per financial year on the principal repayment of the home loan under Section 80C. This is part of the overall limit of ₹1.5 lakh for deductions under Section 80C, which includes other items like Life Insurance Premium, Employee Provident Fund (EPF), Public Provident Fund (PPF), etc.
- **Principal Repayment During Construction:**
- Principal repayments made during the construction period can be claimed as a deduction under Section 80C, provided that the property is not sold before the completion of the construction.
**Example Calculation:**
- **Principal Repayment:** ₹1,00,000 in a financial year.
- **Claimable Amount:** ₹1,00,000 (subject to the overall limit of ₹1.5 lakh under Section 80C).
### **3. Property Not Self-Occupied**
- **Self-Occupied Property:**
- For self-occupied properties, the maximum deduction for interest under Section 24(b) is ₹2 lakh.
- **Rented Property:**
- For properties rented out, or if deemed to be rented out (e.g., vacant but not occupied by the owner), you can claim the entire amount of interest as a deduction.
- However, you will need to declare the rental income from such properties and deduct the municipal taxes and interest paid on the loan while calculating the taxable rental income.
### **4. Documentation and Filing**
- **Maintain Records:**
- Ensure you maintain all documents related to the loan, including the loan agreement, repayment schedules, and statements of interest and principal repayments.
- Keep proof of possession and construction completion dates for accurate claims.
- **Tax Filing:**
- When filing your Income Tax Return (ITR), ensure you fill in the appropriate sections for claiming these deductions. For interest, it will be reflected under “Income from House Property,” and for principal repayment, it will be under “Deductions under Chapter VI-A.”
### **5. Important Considerations**
- **Claiming Interest During Construction:**
- Ensure you keep track of the period of construction to claim interest correctly in installments.
- **Tax Audit Considerations:**
- If your tax filings are subject to an audit, ensure that all claims and documentation are in order to substantiate your claims.
### **Summary**
- **Interest on the home loan:** Up to ₹2 lakh per year for self-occupied property; no limit if rented out.
- **Principal repayment:** Up to ₹1.5 lakh per year under Section 80C, irrespective of the property being rented or self-occupied.
For specific cases or complex scenarios, consulting a tax professional or chartered accountant can provide tailored guidance and ensure compliance with current tax laws.
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