Rachit (Analyst) (913 Points)
17 April 2013X has purchased a plot of land and has taken housing loan for acquisition of the same. He constructs a house upon it which is very small in comparison to the plot of land.
Can X now claim deduction u/s. 24(b) in respect of housing loan taken for purchase of the plot land.
Is there any yardstick upon the size of house to be constructed?
Neha sharma
(-)
(1257 Points)
Replied 17 April 2013
Dear Rachit
There is no criteria as such... There is no correlation between the amount of funds invested out of own pocket and the loan taken... You can claim deduction for the loan taken irrespective of the amount invested out of your pocket
Rachit
(Analyst)
(913 Points)
Replied 17 April 2013
Dear Neha
Actually the loan taken is for purchase of a vacant plot of land without any construction upon. To avail benefit of sec.24(b) a house is mandatorily required. This deduction is not available for purchase of vacant land.
Hence my query was whether a very small house constructed on this land would make the person eligible for the deduction?
No. You get no tax breaks if you take a loan to buy a plot of land.
But, if you take a loan for construction, that means a loan to build a house on that plot of land, then you can get a tax break.
In such a case, the tax benefits are available on both portions of the loan the one to purchase the plot and the one taken to construct the house thereon.
Let's say you took a Rs 5,00,000 loan to buy a plot of land and a year later you took a Rs 3,00,000 loan to construct. Now the total amount will be combined and you will get the tax benefit on the entire amount.
Vinay Garg
(Service Tax Expert)
(780 Points)
Replied 17 April 2013
No. If you take loan only for land purchase, you are not eligible for any IT benefits.
If you take a composite loan (land and house construction), only after the completion of the construction will you be eligible for income tax benefits.
PMA Nooruddin
(M.Com, Finance Manager)
(422 Points)
Replied 18 April 2013
No Exemption if purchase of Plot, coz, simple, if he purchases, then claims, and sells it then IT Dept is at loss
So this is applicable only on Home loan and that too you should be possesion of the house, you can claim HRA if you are not Resiing in that House.
Now, Home loan is coverd under 80C where :
Interest paid can be claimed upto Rs.150000 or actual paid whichever is less
Principal amount can be upto Rs.100000
nikhiljagota@rediffmail.com
(Area Credit Manager)
(25 Points)
Replied 18 April 2013
Dear Rachit
He can claim deduction for housing loan u/s 24 b, if he manages to take a IT certificate from Financial Institution from where he has taken the loan, The mechanism goes as follows:
The financial institution which has first given a loan for plot purchase, changes the nomenclature of Plot loan to Home Loan at the time of disbursing the loan for construction,by taking over earlier plot loan and booking entire amount as hl.
Eg If Mr X has taken 10 lacs for plot purchase of 1000 sq ft plot, now he wishes to take 2 lacs to contruct around 250 sq ft, the financial institution, can give a fresh Hosuing loan of 12 lacs by taking over loan of 10 lacs and booking the case as Home loan.
CAclubindia
