Friends,
If you have taken a Loan for construction of House or to purchase of a house which should be a self occupied house property, then there is deduction available U/s 24(b) of the Income Tax Act-1961. The admissible deduction is up to Rs. 150,000/- against the interest payable on the loan and up to Rs. 1,00,000/- against principal amount u/s 80C. There is no change in the deduction available towards interest & principal repayment of the housing loan. The same has been discussed at length in earlier issues of Tax Talk as well.
For the mass benefit, we are reproducing the income tax benefit towards interest & principal repayment available u/s 24(b) or U/s 80C of the Income Tax Act-1961 as under:
Interest payable on Home loan:
U/s 24(b) of the Income Tax Act-1961, deduction up to Rs. 150,000/- is admissible against the interest payable on the loan availed for purchase / construction of the self occupied house property. [However, the acquisition or construction of the house property should be completed within 3 years from the end of financial year in which home loan was taken; otherwise, the deduction would be restricted to Rs. 30,000/-]
In respect of loan taken prior to 01.04.1999, the deduction can’t exceed Rs. 30,000/- for the self occupied house property.
Pre-construction period Interest [Loan taken against/for under construction property]:
The interest paid during the period the house property is under construction is not deductible in the year of payment. Interest in respect of pre-construction period is deductible in five equal annual installments commencing from the previous year in which the house is constructed/acquired. For this purpose “pre-construction period” means the period commencing on the date of borrowing and ending on March 31 immediately prior to the date of completion of construction /acquisition.
In respect of self occupied house property, it may be noted that for purchase / construction, interest deduction is admissible up to Rs. 1.50 Lacs whereas there is a ceiling of Rs. 30,000/- only in respect of loan taken for Repairs/ Renewal or Reconstruction.
Principal repayment of the home loan:
In respect of principal repayment of home loan, deduction is admissible u/s 80C. Overall deduction U/s 80C (which also includes deduction towards LIC/ PPF, Tuition fees etc) can’t exceed Rs. 1 Lacs.
