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Query on Income Tax Rebate for Home Loans

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Query on Income Tax Rebate for Home Loans

Last updated: October 16 2014
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  • Query on Income Tax Rebate for Home Loans

    Hello,

    Pls help me with the answer to my below query regarding Income Tax rebate on home loan:

    I have booked an apartment and the possession for which is due somewhere in early 2014. Right now, I am paying the pre-EMI for the partial amount disbursed under flexi plan. I want to make a prepayment to the bank for a part of the principal amount. My question is whether the bank will offer me a provisional tax certificate this financial year for that principal paid (to take rebate under sec 80C) or it will only give me the certificate once I start the full EMI?

    Note: My home loan is from Axis bank and the pre-EMI started in Oct'11.

    Pls reply. Thanks!
  • #2

    #2

    Re : Query on Income Tax Rebate for Home Loans

    They'll give you the break-up of Principal Amount & Interest Paid. You can show these certificate to cover your 1 lac limit of 80C with Principal Amount. 1 lac - PF Amount is the rest, you need to give proof for. I gave this certificate at my office. They readily accepted.

    Comment

    • #3

      #3

      Re : Query on Income Tax Rebate for Home Loans

      Originally posted by LChand View Post
      They'll give you the break-up of Principal Amount & Interest Paid. You can show these certificate to cover your 1 lac limit of 80C with Principal Amount. 1 lac - PF Amount is the rest, you need to give proof for. I gave this certificate at my office. They readily accepted.
      @Lalchand; thanks 4 ur reply.. Is your loan also under pre-EMI stage or your full EMI has started?
      Which bank have you taken the loan from? Have they issued a provisional tax statement before 31st March, 2012 for the current financial year?
      pls reply..

      Comment

      • #4

        #4

        Re : Query on Income Tax Rebate for Home Loans

        Originally posted by sbuyer View Post
        @Lalchand; thanks 4 ur reply.. Is your loan also under pre-EMI stage or your full EMI has started?
        Which bank have you taken the loan from? Have they issued a provisional tax statement before 31st March, 2012 for the current financial year?
        pls reply..
        My loan is through LIC Housing. I have started full EMI from day 1. They issued me a provisional certificate for Tax rebate under section 80C for 2011-2012 (till March-2012), it was escalated to show what amount I would have paid as Principal Amount up to Mar-2012.

        I think, even in Pre-EMI too...you are paying Principal Amount + Interest, so you are liable to get such certificate & rebate.

        Give a call to Axis Bank to clarify further.

        Comment

        • #5

          #5

          Re : Query on Income Tax Rebate for Home Loans

          No Tax Rebate during Under Construction Period or before Registry of Flat !!!!!

          If you have secured a home loan for the flat, its repayment schedule is treated as pre-EMI (equated monthly instalment) till you get the property’s possession.

          Section 88 allows tax rebate only in respect of a house property which is capable of being taxed under "income from house property". A house under construction therefore does not make the grade.

          A buyer is entitled to tax rebate under sections 24 (b) and 80 (c) of the Income-Tax Act 1961, after securing possession of the property and thus commencement of EMI. Till then, he gets no tax relief on the pre-EMI.


          For the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of

          (a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

          (b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or

          (c) repayment of the amount borrowed by the assessee from

          (1) the Central Government or any State Government, or

          (2) any bank, including a co-operative bank, or

          (3) the Life Insurance Corporation, or

          (4) the National Housing Bank, or

          (5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or

          (6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or

          (7) the assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or

          ( the assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or

          (d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee, but shall not include any payment towards or by way of

          (A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

          (B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

          (C) any expenditure in respect of which deduction is allowable under the provisions of section 24;

          Comment

          • #6

            #6

            Re : Query on Income Tax Rebate for Home Loans

            Originally posted by LChand View Post
            My loan is through LIC Housing. I have started full EMI from day 1. They issued me a provisional certificate for Tax rebate under section 80C for 2011-2012 (till March-2012), it was escalated to show what amount I would have paid as Principal Amount up to Mar-2012.

            I think, even in Pre-EMI too...you are paying Principal Amount + Interest, so you are liable to get such certificate & rebate.

            Give a call to Axis Bank to clarify further.
            Three points of repayment of Housing Loan -:

            1. Pre-emi- Where only interest is paid
            a when full months installment is no recoverable in that particular month
            b. when only the interest is payable till posession of flat.
            2. Tranche payment - where the amount that is disbursed ( clp/flexi) you pay both principal and interest.
            3. Emi- this starts immediately when loan is fully disbursed and both principal and interest are paid monthly.

            Comment

            • #7

              #7

              Re : Query on Income Tax Rebate for Home Loans

              Tax deductions for House under-construction

              Can we claim tax benefits for home loan taken for under-construction house ? A lot of investors assume that they can claim tax deductions and without doing much research, they go ahead with the loan. However they should know the fact that claiming tax in case of under-construction house is different. You cannot claim the tax deductions for the principal amount for under-construction house. You need to have possession and certificate of ownership to claim tax under 80C. However Interest part is little different. You can not claim the interest amount, unless you get the possession of house . However you can always claim the deductions later in 5 equal installments for next 5 yrs from the end of financial year of possession.

              Example : Suppose Ajay bought a house on loan on 5th June 2010 and he pays total 4 lacs as interest in next 2.5 yrs and gets possession on 7th Nov 2012 . He will be able to claim this 4 lacs Rs in equity installments in the next 5 yrs period , which is 80,000 per year in 2013 – 2017 . However the total limit for exemption will still be 1.5 lacs per year.

              Comment

              • #8

                #8

                Re : Query on Income Tax Rebate for Home Loans

                Saurabh bhai.. I am paying 100% full EMI from day 1 for the total approved amount...though not full disbursed yet. But its coming under tax rebate of 80C. A/F department at my office accepting this.

                Comment

                • #9

                  #9

                  Re : Query on Income Tax Rebate for Home Loans

                  Originally posted by LChand View Post
                  Saurabh bhai.. I am paying 100% full EMI from day 1 for the total approved amount...though not full disbursed yet. But its coming under tax rebate of 80C. A/F department at my office accepting this.
                  This is wrong... however 80% public do this. BTW I have taken maximum possible IT Rebate benefit for all of my 3 properties invested (2 of them was RTM hence no issue) during last 6 years, for RTM IT Rebate taken was fine but for under construction its totally Illegal... See my above example what can be do exactly with under construction....

                  BTW 5% public when comes with in Review/SCRUTINY case from IT Department then IT Department will first ask for Registry and if can not be shown (ie not possession) then ITO can review all Returns of last 6 years and add all Income Tax should be paid at the amount of rebate taken wrongly during under construction period ie before registry... ITO will take all of that amount (generally 30% tax comes at Rebate taken) and can also put big penalty as per rules on that wrongly saved tax.
                  Last edited January 23 2012, 11:03 PM.

                  Comment

                  • #10

                    #10

                    Re : Query on Income Tax Rebate for Home Loans

                    I gave them LIC Policy Premium slip + PF which combined together crossing 1 lac. I would ask them not to consider the Principal Paid under 80C. Should not be a problem...will do it tomorrow..itself..

                    Comment

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