House Property

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sathyam (Querist)
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27 July 2009 Dear Experts,

A building has been constructed by borrowing loan from relative to the extent of Rs.20,00,000/-. Later on the property was mortgaged and the loan borrowed from relative was settled. Whether the interest on mortgage loan can be claimed in computation of house property income? The building cost is Rs.55,00,000/-. Building mortgage loan borrowed is Rs.20,00,000/-. Whether the interest on Rs.20,00,000/- can be claimed?

Anubhav Bansal

Anubhav Bansal (Expert)
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27 July 2009 Saka,

To begin with I want to quote to you the Section 24(b) of the Income Tax Act which grants us the deduction to the interest on loan borrowed. The Section 24(b) reads as follows:-
where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital

Interpreting the words of the statue, its clear that you will not be elligible for the interest on mortage loan. As the loan on mortage is not for either of the mentioned purpose.

CA Shailesh +91 9393926464

CA Shailesh +91 9393926464 (Expert)
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28 July 2009 Tax benefits on interest component of the home loans u/s 24(b) is allowed not only for original home loan but also for second /subsequent / new home loan taken to refinance the first loan. In other words, if the new housing loan is taken to pay off an existing housing loan, tax benefit under section 24(b) is allowed.

However, unlike section 24(b), there is no specific mention under section 80c for prepayment of existing home loan by taking a fresh home loan.

So what it means is that when you repay the balance outstanding principal component of your first / original / existing home loan by taking a second home loan, you’ll be entitled for tax deduction under section 80c but within the overall limit of Rs one lakh. Further, when you subsequently start repaying your second housing loan, you’ll be entitled for tax benefit only on the interest portion u/s 24(b) and not on the repayment of principal component u/s 80C. This is quite obvious because otherwise it will amount to double tax deduction on the principal component of the home loan.

Src:https://www.themoneyquest.com/2009/04/home-loan-tax-benefits-deduction-80c.html

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