Flat possession after 3 FY. Will get rebate on interest paid

Tax queries 5066 views 10 replies

VIJPS

manager

95 Points Joined December 2010

I want to know that whether any provision for tax benefit on house loan interest for my case who’s builder giving flat possession after 3 financial year..

I taken home loan from HDFC back in FEB-2007. Till now I am paying pre-emi to HDFC bank and not yet receive possession from builder. The builder told that he will give possession in next year July 2011.

So I have paid pre-emi for following finance year
FY 2007-2008 : PRE-EMI
FY 2008-2009 : PRE-EMI
FY 2009-2010 : PRE-EMI
FY 2010-2011 : PRE-EMI
FY 2011-2012 : will get possession in flat

will I get any tax detection on interest which I paid as Pre-EMI between in last 4 finance year 2007-11 under section 24C next year ( F.Y. 2011-12 ) onward like other are gettting to divide all pre-emi in 5 equal installment. ?

Till now I have not taken any house loan tax rebate on taken loan .

What is criteria in income take who house home possession take more then 3 finance year ?

Thanks in advance

Vikas kakkar
9620244420

Replies (10)

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

Section 24

DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY.

(1) Income chargeable under the head "Income from house property" shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely :-

(i) In respect of repairs of, and collection of rent from, the property, a sum equal to one-fourth of the annual value;

(ii) The amount of any premium paid to insure the property against risk of damage or destruction;

(iv) Where the property is subject to an annual charge, (not being a charge created by the assessee voluntarily or a capital charge), the amount of such charge;

(v) Where the property is subject to a ground rent, the amount of such ground rent;

(vi) Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital;

Explanation : Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as a deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years;

(vii) Any sums paid on account of land revenue or any other tax levied by the State Government in respect of the property;

(ix) Where the property is let and was vacant during a part of the year, that part of the annual value which is proportionate to the period during which the property is wholly unoccupied or, where the property is let out in parts, that portion of the annual value appropriate to any vacant part, which is proportionate to the period during which such part is wholly unoccupied.

Explanation : The deduction under this clause shall be made irrespective of whether the period during which the property or, as the case may be, part of the property was vacant precedes or follows the period during which it is let;

(x) Subject to such rules 421 as may be made in this behalf, the amount in respect of rent from property let to a tenant which the assessee cannot realise.

(2) No deduction shall be allowed under sub-section (1) In respect of property of the nature referred to in sub-clause (i) of clause (a) of sub-section (2), or sub-section (3) of section 23 :

Provided that nothing in this sub-section shall apply to the allowance of a deduction under clause (vi) of sub-section (1) of an amount not exceeding thirty thousand rupees in respect of the property of the nature referred to in sub-clause (i) of clause (a) of sub-section (2) of section 23 or sub-section (3) of section 23.

Provided further that where the property is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed before the 1st day of April, 2001, the provisions of the first proviso shall have effect as if for the words "thirty thousand rupees", the words "seventy-five thousand rupees" had been substituted.

(3) The total amount deductible under sub-section (1) in respect of property of the nature referred to in sub-clause (ii) of clause (a) of sub-section (2) of section 23 shall not exceed the annual value of the property as determined under that section.

Amit Arora

Service

44 Points Joined December 2007

1. Interest payable or paid have to be aggregated till the end of the financial year (i.e. upto f.yr. 2010-11 in your case) before the financial year in which the acquisition will be completed.

2. Aggregated interest will be allowed as a deduction in five successive financial years starting from the year in which the acquisition or construction will be completed.

3. Maximum amount of interest (both pre and post construction period) which will be allowed as a deduction shall not be more than Rs. 150000/- in one financial year.

Thanks & Regards

CA. Amit Arora

CA PARAS BAFNA

Practising CA

33428 Points Joined April 2009

The expert has reproduced Section 24 as it was prior to 1.4.2002.

In the substituted Section 24, which is currently in effect, it has been prescribed that where construction is completed within 3 years from the end of financial year in which loan was taken, the prescribed limit of deduction U/s 24 is 1.50 lac.

However, in other cases, where completion is not within prescribed period, deduction is limited to Rs 30000/ only in case of Self Occupied Property (SOP).

It is therefore clear that Pre EMI interest alongwith interest after construction is limited to Rs 30000/- p.a. for the purpose of deduction U/s 24 in case of SOP.

However, if you let out the property immediately after construction completes, there is no restrictive limit for deduction.

VIJPS

manager

95 Points Joined December 2010

Originally posted by : Amit Arora

1. Interest payable or paid have to be aggregated till the end of the financial year (i.e. upto f.yr. 2010-11 in your case) before the financial year in which the acquisition will be completed.

2. Aggregated interest will be allowed as a deduction in five successive financial years starting from the year in which the acquisition or construction will be completed.

3. Maximum amount of interest (both pre and post construction period) which will be allowed as a deduction shall not be more than Rs. 150000/- in one financial year.

Thanks & Regards

CA. Amit Arora

Thanks Amit sir for your valuable advice.

I have seen some quote on same tread and what am I understand from those quote is like “ possession of property should be within 3 finance year after taking home loan to avail rebate of 1.5 lakh otherwise it will be only 30,000 per year only “

Is those quote is not applicable on me ?

The builder is giving me flat possession after 4 finance year but executed buyer-seller agreement in 2007.

If 1.5 lack per annum rebate is applicable on me also then it is fine otherwise if only 30,000 rebate applicable on me then it will be big shock for me because my per-annum interest goes approx 1 lack .

Thanks

Vikas kakkar

9620244420.

VIJPS

manager

95 Points Joined December 2010

I have got following answer for my query . Many thanks to Mr. Paras Bafna and others to clarify and answered in ordinary man format which easily to understand

I am summaries it so that other can review/give suggession and will be benefited other member of group. Because there are many customer india in india where builder does not give possession within 3 years.

1) If the construction of home take more than 3 year financial year after taken home loan then borrower is not eligible for rebate of Rs. 1,50,000 per annum as interest and per-emi interest paid on loan. The borrower will be eligible of only 30,000 Rs per annum on sum of interest paid + per-emi (1/5^th per annun) after possession.

i.e.

Current year interest + 1/5 pre-emi = 1,20,000 then borrower is eligible only fo 30,000 as rebate. ( 1,20,000 - 30,000 = 80,000 will not get any rebate )

Work Around :

If we show that we have given flat at rent then above rule is not applicable . The above rule is applicable only for Self occupied property ( mean where the owner of house is leaving himself/herself )

if you are planning to give it on rent then 1.50 lac limit also will not be applicable.

Yearly Rent +1/5th of Pre EMI Interest=2.00lac ( say) then full interest of 2.00 lac will be deductible.

In short limit of 30000/ or 150000/ will be applicable only when the house property is self occupied

2) To show that flat is not self occupied only rent aggrement is enough to proof . Rent of house is could be any thing ( Rs.1 to upper any limit ) .

3) I am not sure that whether we should be get rebate under section 24c or some other section if property is not self occupied. ?

Any more comment/secession is always welcome.

Thanks

vikakkar @ rediffmail.com

CA PARAS BAFNA

Practising CA

33428 Points Joined April 2009

Dear Vikas,

For the purpose of calculating Income unde rthe head Income from House Property, whereever property is let out (or deemed letout), and Standard Rent is not applicable, Rent will be taken on the basis of following criteria

A> Muncipal Valuation

B> Fair Rent ( Rent Prevailing in the market or in the locality of similar flat)

C> Actual Rent

Out of A, B or C , which ever is higher.

VIJPS

manager

95 Points Joined December 2010

Very much thank you paras sir to bring untold story

Thanks for your valuable input. This is also a very fine point to understand what should be rent ?

Some point is still unclear . If one can answer it may help lot of users.

1) What is minimum period / month in financial year one should give flat on rent to show not self occupied property . Example flat is on rent only 3 month in finance year at rate of 7000 Per month. Then how should we calculate income from house ?

2) If some one is leaving other city say Bombay and flat is in Delhi . Should the owner should need to give flat on rent to show that flat is not self occupied ?

3) If someone is leaving with his ancestor home and he is having flat. Due to some reason he is not able to give flat on rent in that case what is way to show that flat is not self occupied ?

Thanks

Vikas

CA PARAS BAFNA

Practising CA

33428 Points Joined April 2009

1. It is not necessary that the flat must remained let out throughout the previous year. It may remained vacant, due to reasons like , non availability of tenant etc. The owner may claim full year's vacancy allowance.

2. Due to employment if the owner is residing elsewhere, in a property not belonging to him, then he can say that his Delhi Flat is Self Occupied, provided , the owner does not receive any rent or other benefit from that property.

3. If the owner is having only one flat, which is not let out, can be claimed as self occupied.

VIJPS

manager

95 Points Joined December 2010

Thanks Paras for your input.

Second point is not much clear . Since the flat completion is taking more then 3 year then we need to show it as ""not self occupied property " otherwise limitation of 30,000 will come.

So question is like , If owner is leaving in Bombay and flat is in Delhi, and flat owner does not get proper tenant then how flat owner can show flat as**** not self occupied ****and how can he come out from limit of 30,000 or 1,50000.

As pervious reply show that if owner we show flat as not self occupied then there is no limit on interest paid. So we always want to show flat as not self occupied.

Thanks

vikas

Rajiv

AVP

21 Points Joined July 2012

Dear Sir,

Thanks for so nice clarifications so far on the subject. Just one question. Do we need to show this loss (which shall be set off after house possession) from house property in schedule -CFL of ITR-2 and if yes, kindly describe how?

Thanks in advance.

Rajiv