Query u/s 80c

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will repayment of housing loan principal amount qualify for section 80c deduction if new loan is taken from same bank in order to avoid higher interest rates of previos loan. if it qualifies for deduction u/s 80c then will repayment of principal of such newly taken loan qualify for deduction u/s 80c in future years? pls gve reference of relevant case laws.
Replies (6)

Yes, the same will be the case of refinancing, so definitely deduction u/s 80C......

Yes, it is allowed but not penalty.

For repayment of HL thru loan porting no deduction u/s 80C is allowed.

 

Since 80 C requires that amount invested should be from earned Income.

 

However you can claim exemption from new loan.

 

Thanks//VaibhavJ

Should be allowed. As Mihir said, any penalty charged by the bank won't be allowed.
The thing is how can principal repayment be allowed when it is out of other borrowed loan that too of same bank? And further again deduction of principal repayment will be claimed by the assesee for such new loan. So it will amount to claiming of deduction two times. Such a practice would be a good tax evasion policy when there is no other 80c investment like lic/ppf etc. Also prepayment charges of loan has been allowed by SC as a interest u/s 24b.

1.  If you replace the loan with another loan, You will claim principal repayment deduction against the new loan only.

 

2.  There is a difference between penal interest and normal interest.  I don't think you can cover penal interest under 24b.


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