06 May 2008
The following tax benefits are available on housing loans:
U/s 24 deduction up to Rs 30,000 is available on interest on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing, whereas the enhanced limit of Rs 1.5 lakh is applicable on loans taken on or after April 1, 1999 only for acquiring or constructing. The acquisition or construction should be completed within 3 years from the end of the year in which the capital was borrowed. It is possible to claim this deduction on two or more loans. In any case, the ceiling on total amount of deduction is Rs 1.5 lakh in a year. If the house being rented out, the entire interest payable without any ceiling can be deducted from the rent received.
It is necessary for the assessee to obtain a certificate from the lender that such interest was payable in respect of the amount advanced for acquisition or construction of the house, or as refinance of the principle amount outstanding under an earlier loan taken for such a purpose.
Additional deduction u/s 80C, within the overall limit of Rs 1 lakh for the repayment of the principal amount is available. This deduction is available only on loans for acquiring or constructing a housing property but not for any addition, alteration, renovation or repair. This deduction on repayment of capital is available on loans taken from specific sources whereas for deduction of interest, the loan can be taken from any source.
The deduction, u/s 80C, and the interest, u/s 24, are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known. The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the 4 immediately succeeding years.
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