Home loan tax exemption (pre and post-possession)

Tax queries 424 views 3 replies

Rajeev Gupta

Sales Manager

28 Points Joined July 2011

I took home loan for my new apartment starting April 2014. But I moved into the new apartment only on 1st October 2014. I paid rent and stayed in a rental place from April to September 2014.

Now, am I eligible for complete tax exemption for principal repayment i.e. pre-possession and post possession? Or just post-possession principal i.e. from October 2014 to March 2015?

Similarly, the pre-possession interest (from April to September 2014), can I take tax exemption for it ? (aggregate of this interest divided by 5 for the next 5 financial years)

Or it does not matter as everything happened in one financial year 2014-15.?

thanks

Rajeev

Replies (3)

Vishal Goel

Chartered Accountant

1693 Points Joined April 2014

What is that as per Income Tax Act Pre-Construction period means?

Total interest paid up to the end of financial year, immediate proceeding to the year in which house is completed. For example: a loan was taken on December 2010 and the construction of the house gets completed on September 20, 2013, in that case pre -construction Interest is taken from December 2010 to March 2013. Fyi, even if house is completed on March 31, 2014 then also the pre-construction Interest is considered from December 2010 to March 2013.

Vishal Goel

Chartered Accountant

1693 Points Joined April 2014

Housing Loan taken and possession received in the same year.

Housing Loan can be taken for purchasing or constructing a new house property. When a loan is taken in the same year in which the house property is purchased or constructed, one can enjoy the tax benefits on payment of both principal and interest component of the housing loan.

Principal: The repayment of principal component of housing loan is entitled for exemption under 80C up to Rs. 150,000 along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc. 80C deduction for principal repayment of housing loan is allowed as soon as you start repaying the loan. This tax benefit can be claimed irrespective of the fact that the property is being self occupied or let out.

For claiming such deduction there are certain requirements to be fulfilled i.e. principal repayment will be considered for deduction only if the loan is not taken for improvement, extension, renovation or alteration of an existing house...

Interest: Section 24(b) of Income Tax Act entitles you to claim exemption on interest payment of housing loan against the property purchased or constructed. The benefit can only be taken from the year in which the possession has been received. The actual interest payable is allowed as deduction subject to maximum of Rs. 200,000 for a Self-Occupied property. In the case of Let-Out property, there is no maximum limit and the entire amount of interest payment can be taken for tax benefit.

Hariharan

Consultant

54 Points Joined December 2014

Could you please provide clarifications for the below queries regarding tax exemptions for house registration charges.

1. Does stamp duty and registration fees paid for a new flat registration qualify for tax exemptions. Is construction agreement charges paid for registering the flat (paid to Tamilnadu govt) exempted under Section 80C.

2. Can MoD charges be claimed under this section as the payment is going for the state government ?

Regards,

Hariharan