80 c Tax rebate will revert if sell a house before 5 years

Only owner of the property is entitled for deduction, so have wrongly claimed the deduction of 80c as well as interst deduction.

No provision of reversal.

Tax deductions under section 80C are generally given on long-term investments. Most tax savings investments have a lock-in period, which makes sure that the investments are for long term. Lock-in refers to a minimum time period before which you cannot withdraw the amount invested. 
For example, PPF is 15-year account, NSC is locked in for 6 years, bank FDs are for 5 years and ELSS are locked in for 3 years. Tax deductions claimed on these investments cannot be taken back. So these become irrevocable deductions.
For some other investments such as house property and insurance policies there is no lock-in period. You can sell your home any time you want to and surrender/cancel your insurance plans whenever you wish to do so.
For these investments the income tax law indirectly provides for a lock-in period. For house property it is set at 5 years while for insurance policies it is 2 years.
So if you sell your house before 5 years or discontinue your insurance policy before 2 years the tax deductions claimed on the same in the earlier years are added to the taxable income of the year in which house property is sold or insurance policy is cancelled/ discontinued. 
Thus, deductions under section 80C on house property and insurance are revocable. That is, they can be taken back.
While some deductions are revocable in nature some are irrevocable. From the list of investment and tax saving options that we discussed yesterday (discussed in Risky markets? Safe investment avenues) EPF, PPF, NSC, bank FDs, ELSS and your child's tuition fees are irrevocable and payment of stamp duty and registration fees and repayment of home loans are revocable under certain conditions.
These conditions are:
Suppose you have taken a home loan from a bank at 10% floating rate of interest. If some other bank offers you a loan at 9% floating rate of interest and you switch to this loan then you have refinanced your home loan.
Deduction is also not available if the construction of the property is not completed before the last day of the financial year. If you want to avail of tax deduction on any property this financial year (2007) then you need to complete work on it before March 31, 2007.
An important point is this is a revocable deduction. If the property is sold within 5 years from the end of the financial year in which it was purchased then all the deductions claimed under section 80C in respect of that property are added to the taxable income of the assessee in the year of sale.
This is a revocable deduction. If the property is sold within 5 years from the end of the financial year in which it was purchased then all the deductions claimed under section 80C in respect of that property are added to the taxable income of the assessee in the year of sale.
The deduction is revoked if the policy is terminated before paying premiums for at least two years. In case of single premium policies, the deduction is revoked if the policy is cancelled before 2 years from the date of commencement of insurance.
Hence it is important to set a priority on your investments while claiming tax deductions.

Thanks Ashish for your response.

a littile doubt:

Bank asked me to add my mothers name as a co-applicant  as the registry was on her name and i did that. At the time of filling the returns also , i submitted the copy of registry along with the declaration from my mother that she is not claiming any tax benifit on this loan. So when you say wrongly availed, what does it mean?

-Thanks,

Asheesh

Ok, Property is on my mothers' name.

I purchased it from my taxable income and availed the tax benifit.  now if she sell the property within 5 years, what will be the tax implications on me?

Originally posted by : Asheesh
	Ok, Property is on my mothers' name. I purchased it from my taxable income and availed the tax benifit.  now if she sell the property within 5 years, what will be the tax implications on me?

1. you have wrongly  claimed 80C claim, the assessing officer did not looked in to the registered intrument, but passed on strength of loan papers only, 80C is available on self occupied property only.

2. any property which is sold within 5 complete financial years of purchase on which 80C benefit is availed, then the amount on which 80C benefit is availed in past years will be added back to the taxable income of the year of sale. 

advised not to make mistakes knowingly, and let the 5 years complete , once the rule bindings are over with time, no one will look in depth of past mistakes. as now if the property is sold and 80C is reversed then the officer has to look in depth in registraton instrument and loan papers, may be this would invite additional troubles for wrong availment and concealment of facts. 

You have taken a wrong benefit of section 80 C; you can claim benefit of section 80 C only when you are a co-owner of House property. you can take full amount  benefit if you have submitted a declaration from other co-owner that he/she shall not claim the same benefit.

Now, if your case are comes in scrutiny then you will be liable for penalty u/s 274(1) (g) for claiming wrong tax benefits. Because in both case under section 80 C and in section 24, benifit of tax can be claimed only when house property is registered in your hands either fully or partly as a co owner.
There is no question of reversal of tax benefit in your assessment now you was not liable to claim.

atul is right