Friends,
Are you planning to construct a House or purchase a built up house? Are you a Tax-Payer ? Then you can also save Tax if you construct the House or purchase a built up house by taking a Loan from a Bank or from the institution where you work. There will be 2 type of deductions you can claim i.e. one for the Principal amount you pay and the second is for interest paid on borrowed capital. Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-
(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
In case of Serial No. 3 above
(a) The acquisition or constructing of the house should be completed within 3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
(b) Further any prior period interest for the FYs up-to the FY in which the property was acquired and constructed shall be deducted in equal installments for the FY in question and subsequent four FYs.
(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.
