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Housing loan deduction (Income Tax)

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This query is : Resolved


( Author )
24 March 2012

My brother has taken a housing loan from a bank in August 2010 for a house which is under construction. The possession is likely to be obtained in January 2013. Please advise the tax treatment to claim deduction for repayment of housing loan (principal and interest)till March 2012.


Seema

( Expert )
24 March 2012

As per provisions in Income Tax Act, "Money may be borrowed prior to the acquisition or construction of the property. In such a case, interest paid/
payable before the final completion of construction or acquisition of the property will be aggregated and allowed for five successive financial years starting with the year in which the acquisition or construction is completed"
In your case, as the possession (acquisition) is not yet received till end of 2012, No deduction will be allowed this year, deduction will be allowed from next year ie 2013 when you get the possession and the amount of interest paid prior to the year 2012 ie from 2010-2012 will be allowed in 5 equal installments.


B.Chackrapani Warrier

( Expert )
24 March 2012

Deduction under section 80C(2)(xviii) will be allowed for the principal portion of the loan repaid from the date of getting the ownership of the house property. However,benefit of deduction will be lost for the repayment of principal portion made prior to getting the ownership.


Santosh Mishra

( Expert )
08 March 2013

Dear Mr Chackrapani

IT section refered by you says:

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 assessee’s own residence, have been chargeable to tax under that head.



My query is that how property can be charged to head "Income from house property" before completion of construction.


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