Income Tax benefits on Home Loan

 

Income Tax benefits on Home Loan

 Deduction on Home Loan

A home loan should be taken by an individual for purchase or construction of house property and the construction of the house property should be completed within 5 years from the date of availing loan.

The EMI comprises of

  • Ø Principal Amount
  • Ø Interest on Home loan

Deduction Under Section 80 C-Principal Amount

Under this section, an individual is entitled to tax deductions on the amount paid as repayment of the principal component on the housing loan. An amount up to Rs.1.50 lakh can be claimed as tax deductions under Section 80C. However, the tax benefit on the repayment of the principal amount can be claimed only after the house is constructed. The section does not allow deductions for the repayment of the principal part during the years the house was being constructed.

Deduction Under Section 24-Interest paid on Home Loan

Under Section 24 of the Income Tax Act, an individual can claim tax deduction of the interest payment on the housing loan up to a maximum amount of Rs.2,00,000.

Deduction if property is jointly owned-

Deduction Under section 80C and Interest on borrowed capital can be claimed if the spouse is employed and has a different source of income. Both can claim deduction under Section 80C up to Rs.1.50 lakh from the total income. If the house is jointly owned, each co-owner can claim deductions up to Rs.2 lakh on account of the interest on borrowed money.

Whether deduction can be claimed on under constructed property

Deduction under section 80 C cannot be claimed till the completion of the construction of the property but interest on pre-construction can be claimed on completion of construction in five equal instalments.

Reversal of deduction on House property on sale within a period of 5 years

If the house property is sold within 5 years of possession, any tax deductions already claimed will be reversed. However, the tax exemptions on interest paid will remain unchanged.

Deduction under section 80EE

If the stamp duty of the house property is less than 45 lakhs and the amount of loan is less than 35 lakhs then the assesse can claim an additional deduction of Rs.1.5 lakhs.

Maximum deduction an assesse can claim

The maximum deduction on interest on self-occupied house property is Rs. 2lakhs but in case of let out property there is no limit. This is to mention that the total loss from house property which can be adjusted with other sources of income i.e income from salary can be adjusted to a maximum of 2 lakhs.

Loss from house property can be set off against

With effect from the assessment year 2018-19, loss under the head “house property” shall be allowed to be set-off against any other head of income only to the extent of Rs. 2 lakhs for any assessment year.

Carry forward and set off of house property loss

If loss under the head “Income from house property” cannot be fully adjusted in the year in which such loss is incurred, then unadjusted loss can be carried forward to next year. In the subsequent years(s) such loss can be adjusted only against income chargeable to tax under the head “Income from house property”. Such loss can be carried forward for eight years immediately succeeding the year in which the loss is incurred. Loss under the head “Income from house property” can be carried forward even if the return of income/loss of the year in which loss is incurred is not furnished on or before the due date of furnishing the return, as prescribed under section 139(1).


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