LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Deduction u/s 24b

Ravi Ganaesha (accountan) (42 Points)

20 August 2015

Dear Sir/Madam,

i want to know that how interest componet allowed u/s 24b

If I Borrow a mortgage loan of Rs. 1 crore

I use Rs. 50 lakhs for House construction

And Rs. 50 lakhs for business establishment

In this case still I am able to claim interest amount on loan of Rs.50 lakhs u/s 24b of income tax as I used Rs.50 lakhs for constructions of House property.

Reply
Follow
Share

10 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 20 August 2015

Interest relavant for loan on construction of house can be claimed as deduction u/s 24b

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 20 August 2015

Hello
Agree with Poornima Ji

I have a question..

If you take a home loan, how u can use it for buiness purpose?

Is it possible ?

Ravi Ganaesha (accountan) (42 Points)
Replied 20 August 2015

Sir it is not a house loan it mortgage loan using for both purpose that is house construction and business startup

Rashi Bajaj (CA) (752 Points)
Replied 20 August 2015

Agree with Poornima. Interest pertaining to loan amount invested in House Property is eligible as deduction.

Pre construction Interest: 1/5 for five years from possesion

Later: As accrued during the year.

If property is SOP, interest limit = 2,00,000/-

Yash (Student CS) (32 Points)
Replied 20 August 2015

Tax benefit under Section 24B for the payment of interest for home loan. This section allows tax deduction.

The following is applicable for the home loan that is taken for completed property (and not for under-construction property)

The maximum tax deduction allowed under section for the self-occupied* property is subject to a maximum of INR 150,000. However, in case the home loan is taken for which the property is non-self-occupied**, NO MAXIMUM Limit has been prescribed (you can claim the entire amount of interest paid as tax deductible from the income)

It is important to note that if the property is not self-occupied by the reason of the fact to his employment, business or profession carried on at any other place, he has to reside at other place not belonging to him, then the maximum tax deduction allowed is INR 150,000.

It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.

Example on "Accrual Basis": This means that is your interest component To Be paid for the financial year is INR 125,000. If you have missed some of your installments in this year hence the total interest paid is less than INR 125,000. Even if the interest paid is less but on accrual basis you can actually claim deduction of INR 125,000.

*Self-occupied = The property for which one has taken the home loan and the property is used for self use. The property is also self-occupied even if one does not stay in that property and has not let-out (rented) the property.

**Non-Self-Occupied = The property for which one has taken the home loan and the property has been rented to other individual(s).

Section 24B for a under-construction property. In case of under construction property many people take home loans during the under-construction stage and start paying EMI to the bank. The section 24B DOES NOT ALLOW for the TAX DEDUCTION of INTEREST for the HOME LOAN till the construction of the property is complete.

1. If the loan is taken for repair/renewal/reconstruction - No tax deduction is allowed till the construction is complete.

2. If the loan is taken for purpose of purchase/construction - The interest that has been paid before the completion has to be aggregated and the whole aggregated amount shall be allowed as tax deduction in 5 equal installments for 5 successive financial years starting from the year in which the construction has been completed.

Now, As per Section 24 of the Income Tax Act, tax deduction for payment of Interest would only be allowed from financial year 2012-13 onwards. However, the interest for the home loan on before the completion of Construction (i.e. Rs. 3,00,000) would be allowed as tax deduction for the next 5 Financial years @ 50,000 p.a. commencing from Financial Year 2012-13 onwards. (Easy amounts have been taken in this example for simplification purposes)

Important Points:-

Interest paid for outstanding amount is not allowed as Tax Deduction.
This tax deduction shall be available only if the construction is completed within 3 years from the end of the financial year in which the capital is borrowed
Taxpayer cannot claim any deduction for Commission Paid for arranging the Loan
Tax deduction is allowed under Head Income from House Property, and if there is no income from House Property, a loss under house property would be shown which would be allowed to be set off against income from various other heads.
Tax Benefits of Interest on Home Loan can be claimed only by the person who has acquired or constructed the property with the Borrowed Funds. It is not available to the Successor of the Property. For further information regarding deductions log onto https://www.quicko.com

zoheb (student) (39 Points)
Replied 25 August 2015

Special case limit is 200,000 for sop(r) by finance act 2015. Please check the changes Mr.Yash.

pritesh (student) (29 Points)
Replied 28 August 2015

Please sugest interest deduction is allow us 24b if loan was taken from individual ie not a bank ?????

pritesh (student) (29 Points)
Replied 28 August 2015

Please sugest interest deduction is allow us 24b if loan was taken from individual ie not a bank ?????

Rashi Bajaj (CA) (752 Points)
Replied 28 August 2015

Not allowable from individuals Pritesh

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 31 August 2015

Hello
I m not agree with Rashi

Under section 24, one can claim the interest payments for the home loans taken from his relatives subject to the condition that one must submit the interest payment certificate. Without the certificate, income tax department will not accept the tax claim.
Also note that, when your parents are providing the certificate, they have to pay the income tax for receiving the interest from you. There is no deduction allowed under section 80C for the principal repayment to your parents. Only interest repayment can be claimed for the tax deduction. As far as the principal payments are concerned, they would not qualify for tax benefit as loans only from notified institutions and banks are eligible for such deductions.