80C deduction on housing loan

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FAQ

1). Can one get IT benefits for land purchase loan?

Ans. No. If you avail loan only for land purchase, you are not eligible for any IT benefits. If you take a composite loan (land + construction) and complete the house construction within three years, only after completion of the construction will you be eligible for tax benefits.

2). What are the home loan products for which IT benefits are available?

Ans. Loan availed for construction of a residential property, purchase of residential property, extension of existing house property, major repairs and renovation of a house property are eligible for IT benefits.

3). Can I continue to get IT benefit after shifting my loan account to another bank?

Ans. Yes. You continue to get tax benefit on the previous outstanding loan. If you have availed top-up loan on the existing loan, while transferring your account to another bank, you will not be eligible for IT benefits for top-up amount.

5). Can both co-owners claim IT benefits separately?

Ans. Yes. Both co-owners can claim IT benefits separately, as per the share holding in the property (like 50:50 or 60:40 etc). If share holding is not mentioned in the purchase deed, they can execute an agreement on requisite stamp paper mentioning the share in the property and claim IT benefits separately.

Both can claim deduction up to Rs. 150,000 pa separately, towards interest paid (for self-occupied house and entire interest paid on rented-out house, after computing rental income received) and also up to Rs. 100,000 pa, towards principal loan repaid.

6). Can I claim HRA benefits and can my wife claim IT benefits on home loan?

Ans. No. If you are staying with your wife in the property for which your wife is claiming IT benefits, you cannot claim HRA benefits.

7). If the property is owned by wife who has no income, then as a co-applicant can a husband claim IT benefits?

Ans. No. Income tax benefits are available to only property owners. If you are a co-owner, then you can claim IT benefits.

8). Can one get IT benefits for the interest paid during construction period?

Ans. Yes. Normally home loan is disbursed in 3-4 installments as per construction progress and during construction period, you pay PEMI interest (interest on the disbursed loan amount) on monthly basis. The entire PEMI interest amount is allowed as a deduction (Sec 24 of IT Act) equally over five years starting from the year in which the construction is completed. However for self-occupied house property, total deduction allowed towards interest on home loan is Rs. 150,000 pa.

9). Can one claim tax benefits for acquiring second house?

Ans. Yes. While for the first home (self-occupied), you can claim deduction up to Rs. 1,50,000 pa, there is no limit for claiming deduction for interest paid on the second home loan, but you need to add rental income, called annual value of your second house, to your income. The annual value will be the higher value of the following:

i). Actual rent received pa

ii). Municipal Value

iii). Fair rent fixed by IT Dept.

Out of total annual value, there is standard deduction of 30 per cent available on rental income towards rent collection and maintenance charges and municipal taxes, as well as insurance premiums paid on the property can be deducted. If you have not rented out the second house, you need to consider notional rent for income tax calculations.

However deduction in respect of principal loan repaid is restricted to Rs. 100,000 from both the home loans (Under Sec 80C).

10). Are there IT benefits on personal loans?

Ans. Yes. If you have taken a personal loan from a bank, HFC, LIC of India, employer (State/Central Govt., local body or public limited company) and utilised the money for purchase or construction of a house, you can claim IT benefits for both principal and interest paid. If you have availed loan from a friend/relative, you can claim IT benefits on interest paid only. If you have availed loan for renovation of your house, you can claim deduction up to Rs. 30,000 pa on interest paid.

11). Can one claim IT benefits on a lease-hold property?

Ans. Yes. While granting home loan on leased property, banks and HFCs will insist that lease deed be registered and lease period sufficiently longer than loan repayment period.

12). Will one lose the IT benefits availed if the property is sold?

Ans. Yes. If you sell the property within five years from the year in which you have started claiming IT benefits, you stand to lose the IT benefits availed under Sec 80C (principal loan amount) and such amounts will be clubbed to the income, in which year you have sold the property. However for the deductions claimed for interest paid (under Sec 24), you don’t lose the benefits availed. If you sell the property after five years, then you would not lose IT benefits availed.

13). Can one claim IT benefits on home loan availed for village property?

Ans. Yes. For all residential properties situated anywhere in India including rural, urban and metro cities, you can avail IT benefits.

Biswanath (CA final stude) (56 Points)
Replied 18 December 2009

Hello professional colleagues, Can any body tell me, if I pay housing loan for construction of house on a land which is owned by my father but loan is on my name. Can I take 80C deduction and also can i claim loss under house property. Biswanath

Rahul (CA PCC Student) (34 Points)
Replied 18 December 2009

If any person has taken a loan for purchase or construction of a residential house (not for repairs, alterration etc.) & loan was taken from Bank, Government, Financial Institution or other notified institution , in such cases deduction shall be allowed u/s 80 C for repayment of the loan amount (not for payment of interest) however maximum deduction allowed U/s 80 C can not exceed Rs 100000

in ur case you will take benefit of deduction is only 50000Rs because u have only 50% share

Robin Kumar Gupta (profession) (179 Points)
Replied 18 December 2009

Answer to biswanath query

So, if tax can be levy on income of the owner of the structure even he is not the owner of the land then he can also claim the deduction under Sec 80C chapter VIA for the repayment of housing loan taken for the construction of builiding on the land not owned by him. The person who owns the building need not also be the owner of the land upon which it stands - CIT v. Madras Cricket Club [1934] 2 ITR 209 (Mad.)/Tinsukia Development Corpn. Ltd. v. CIT [1979] 120 ITR 476 (Cal.)/Sri Ganesh Properties Ltd. v. CIT [1962] 44 ITR 606 (Cal.).

Attached File : 55 house property income taxability provisions.pdf downloaded: 155 times

1 Like

Robin Kumar Gupta (profession) (179 Points)
Replied 18 December 2009

Reply to Biswanath query

Owner of structure is liable to tax even if he is not owner of land - In India, in order to come within the provisions of section 9 of the 1922 Act the person who owns the building need not also be the owner of the land upon which it stands - CIT v. Madras Cricket Club [1934] 2 ITR 209 (Mad.)/Tinsukia Development Corpn. Ltd. v. CIT [1979] 120 ITR 476 (Cal.)/Sri Ganesh Properties Ltd. v. CIT [1962] 44 ITR 606 (Cal.)

So, if tax can be levy on income of the owner of the structure even he is not the owner of the land then he can also claim the deduction under Sec 80C chapter VIA for the repayment of housing loan taken for the construction of builiding on the land not owned by him

sagar (Chartered Accountant) (131 Points)
Replied 22 December 2009

the person whose name is 1st in the loan a/c that person will be entitled to get deduction.

is it correct ?

Sandeep Keswani (Tax Consultant) (1064 Points)
Replied 22 December 2009

Good going Mr. Robin Kumar Gupta......very accurate explanation. Thanx

Sandeep Keswani (Tax Consultant) (1064 Points)
Replied 22 December 2009

Answer to Biswanath's querry

Biswanath, deduction u/s. 80C includes Repayment of Housing Loan taken for acquisition or constrution of residential house, and not the land upon which it is constructed or standing. There is no deduction for repayment of loan taken for acquisition of land.

Even if the land on which construction is made does not belong to you, if you are the owner of the house property constructed thereupon, you can claim deduction u/s. 80C.

Explanation provided by Mr. Robin Kumar Gupta is accurate and superb.

Vaishali Bopardikar (CA final passed) (109 Points)
Replied 23 December 2009

well explained

Thanx....

Priya Rao (student) (281 Points)
Replied 17 August 2010

Helo All, you said that a person can avail a personal loan to utilise it for purchase/construct a house. Can you kindly quote the relevant act/rule confirming the same? And/or could you also specify the process to avail deduction from the same while filing ITR?