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Tax Deductions As Per IT Act for Home Loans

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Tax Deductions As Per IT Act for Home Loans

Last updated: January 9 2015
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  • #11

    #11

    Re : Tax Deductions As Per IT Act for Home Loans

    Originally posted by ksharma_ind View Post
    If I am not wrong then we can get Tax rebate on home loans only if the you get the possession with in three year from the start of the loan. If the possession is deplayed then you don't get any rebate even after getting the possession. If that is true then isn't it difficult to get tax deduction on a under construction flat in gurgaon. It takes 4-5 years to get the possession.
    this is news.

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    • #12

      #12

      Re : Tax Deductions As Per IT Act for Home Loans

      Originally posted by anubhaviit View Post
      this is news.
      This is correct information..

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      • #13

        #13

        Re : Tax Deductions As Per IT Act for Home Loans

        This is applicable in case of Down Payment. If it is a pre-EMI plan then the three year period starts from the date start of the EMI which is after full disbursement / 2 years from the date of first disbursement which ever is earlier.

        Originally posted by ksharma_ind View Post
        If I am not wrong then we can get Tax rebate on home loans only if the you get the possession with in three year from the start of the loan. If the possession is deplayed then you don't get any rebate even after getting the possession. If that is true then isn't it difficult to get tax deduction on a under construction flat in gurgaon. It takes 4-5 years to get the possession.

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        • #14

          #14

          Re : Tax Deductions As Per IT Act for Home Loans

          Originally posted by kirtikr View Post
          This is applicable in case of Down Payment. If it is a pre-EMI plan then the three year period starts from the date start of the EMI which is after full disbursement / 2 years from the date of first disbursement which ever is earlier.
          So You are saying that we get the IT rebade on down payment from the date of start of EMI even if the possession is due in 3 years ?

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          • #15

            #15

            Re : Tax Deductions As Per IT Act for Home Loans

            It is well known that our home loan EMI divided inti two parts: Principal & Interest.
            Principal part comes under section 80C which max. limit is 1 lacs and Interest part comes under section 24(G) which max. limit is 1.5 lacs as of now.
            There are broadly 2 type of case:

            1. When You got possession of your home: In this case you can avail both benefits (as described earlier), but in this case you cannot avail you HRA.

            2. When your home is under construction: In this case you cannot take Interest Part benefit (comes u/s 24(G)), but you can avail the Principal part (which comes u/s 80C). It is somewhat strange but this is the rule. After completion of your project you can avail the whole Interest part (paid during construction period) in 5 equally divided amount in 5 years and as well as the current Interest part subject to maximum of 1.5 lacs.

            cheers

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            • #16

              #16

              Re : Tax Deductions As Per IT Act for Home Loans

              The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are not interconnected to each other. HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence, feel free to avail both tax benefits accordingly.

              Ajit, currently employed with Company A, is staying in a rented apartment in Mumbai and has bought himself a property in Chennai for which he has taken a home loan. He finds himself in a dilemma while filing tax returns – “Can I claim both HRA and home loan benefits?” This seems to be a confusing factor for most tax payers. When Ajit pays rent, under the Income tax act, he is definitely allowed to claim both HRA and home loan benefits (interest payment and principal repayment).

              Let us evaluate various possible situations an individual can find himself in and understand what the income tax act permits him to do.

              1: You live in your own house

              You have taken a home loan and residing in the house purchased with it. Since you are residing in your own house, you will not be able to claim HRA. However, you will be able to claim tax benefits on both, the principal and interest repaid on the home loan.

              2: You own a house in another city

              This situation was the one faced by Ajit. He resided in Mumbai but had bought an apartment in Chennai taking a home loan. Ajit will be entitled to HRA exemption and tax benefits on both, the principal and interest repaid on the home loan.

              3: Your house cannot be occupied at this point (e.g. under construction)

              You have bought a house in Mumbai taking a home loan and you’re currently living in Mumbai in a rented apartment because the house is under construction. In such a case, you are eligible to claim HRA.

              In the case of tax breaks on the home loan, you can claim tax benefits only for your principal before the completion of your house. Once your house is completed, you can claim tax benefits on the total interest paid upto the date of completion in five equal installments in five years begining from the year of completion.

              4: You have a house which is ready for occupation but you cannot reside in it

              You have bought a house in Delhi taking a home loan and now you aren’t residing in it but are living in a rented apartment in Delhi itself for genuine reasons e.g. the house that you have bought is far away from your office. In such cases, the Income tax act permits the individual to claim HRA and home loan benefits which includes both principal and interest repaid on the home loan.

              Also, please note that if your house remains vacant, then you will still need to pay tax on a notional rent income.

              5: You have rented your own house and currently residing in a rented house

              You took a home loan and your house is now ready for occupation. You have rented the same out while you reside in a rented house. The Income tax act allows you to claim both HRA and home loan benefits. However, in such a case, since you are the recipient of rent because you have let out your own house, that income is taxable at your hands.

              The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are not interconnected to each other. HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence, feel free to avail both tax benefits accordingly.

              Now, that we have dealt with all possible situations with regard to availing HRA and home loan tax benefits, let’s take Ajit’s situation as an example to help you figure out how to avail them.

              Claiming tax benefits on a home loan:

              Ajit had purchased an apartment in Chennai for Rs. 38 L three years back. He took a home loan of Rs 32 L to fund this house purchase. So far, this year he has repaid an interest of Rs 3.3 L and a principal amount of Rs. 60,000.

              Section 80C offers tax rebate on home loans upto a limit of Rs 1 lakh and Section 24 on interest upto a limit of Rs 1.5 lakh. So, Ajit can utilize upto Rs.1.5L on his interest paid and avail the tax benefits in full for the amount paid towards principal.

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              • #17

                #17

                Re : Tax Deductions As Per IT Act for Home Loans

                Section 24(B)

                Well i have a query here, please help.

                I bought a flat which took more than 3 years (appx. 5 years) to complete the construction (from the day i booked and started paying EMI).

                My query is,

                I have taken this flat in 95% down payment and have paid appx 3 lakh as interest to bank before completion of flat. The construction took around 5 years to complete. How much rebate i would get as per section 24(B). Please note this flat is not self occupied it is on rent from Day 1

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                • #18

                  #18

                  Re : Tax Deductions As Per IT Act for Home Loans

                  Can we claim 24b if we have provisional possession letter for this F.Y ? property brrought in this f.y itself.

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                  • #19

                    #19

                    Re : Tax Deductions As Per IT Act for Home Loans

                    Originally posted by satyaprakash47 View Post
                    Can we claim 24b if we have provisional possession letter for this F.Y ? property brrought in this f.y itself.
                    Can any experience member/C.A have an answer of my question?

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