Allowable of interest on Housing Finance

Interest paid during pre construction period allowable in 5 instalments from the year in which the asset is ready for use.

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed²⁴[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.

Explanation.Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]

²⁵[Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

under section 23(2) this above is stated 

if he paid rs. 150000/- as interest. how much it will be deducted from income during the year

Rs. 30,000/- will be allowable from the year in which he gets possession and also for suceeding four years along with the interest he pays in those years. However deduction cannot exceeds Rs. 150,000/-

Dear Biren...

During the year no interest will be allowed as ded. ... The ded. will be allowed only if the house is complete.....so from P.Y.10-11 he can claim the ded. u/s 24b under IFHP.....

The maximum ded will be 150000 for self occupied property... and no limit for let out...

Moreover the house should be constructed or purchased within 3 yrs from the end of relevant previous year to claim 150000 orelse only 30000 will be allowed....

Any interest paid out of india without TDS, will not be allowed as deduction...

Interest will be allowed on due basis.....

Dont forget You can also avail the principal amount of the loan paid from the assessment year in which the house gets completed.