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Home loan interest benefit

15 December 2016

Hi - I obtained an HDFC home loan in FY11 of Rs.35 lakh. Interest accumulated till FY16 is approx.Rs.14 lakh. Interest in current FY17 is approx.Rs.3 Lakh. The possession is scheduled for this month Dec'16. This home is in Dombivli but am staying in Ahmedabad rental home due to job contract. So the Dombivli home needs to be let out. Please help me understand the tax benefits as have not claimed any so far. Thanks.

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3 Replies

Abhijeet Deshpande (Co-Founder & Manager @ Tax-Yantra) (1171 Points)
Replied 15 December 2016

Dear Sir,

Income Tax Act provides the dedcution upto ₹ 200,000 on amount paid towards interest on home loan where the house is owned and self occupied by the assessee. However, there is no such restriction on the amount where the such house property is let-out during the year.

Further, there is a concept of pre-construction and post-construction interest. Pre-construction interest is accumulated till the beginning of the FY in which completion letter is obtained and provided as deduction in 5 equal instalments from the year in which completion letter is obtained. Post-construction interest is allowed as deduction from the beginning of FY, irrespective of date of completion letter obtained during the year. (For ex- Even if the letter is obtained on 31st March 2017, interest from 1st April 2016 to 31st March 2017 will be considered as post-construction & any instrest accumulated upto 31st March 2016 will be considered as pre-construction interest).

Hope this clarifies your doubt.

Thank You!

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 22 December 2016

Hello,

Pre-Construction interest is Rs 14 Lakh( it will be allowed as deduction in 5 equal installments @ 2.8 Lakh p.a)

Current Year interest is Rs 3 Lakh

You can claim in current year total interest amount is Rs ( 3 lakh + 2.8 lakh ) = 5.8 Lakh

Venkateswaran (GM) (23 Points)
Replied 23 December 2016

Thank you Gentlemen - another follow on query - as I am not currently aware of the rental income rate for the home, and it could be only from Feb'17, so potential income only for 2 months this FY17, how do I estimate an approx.rental income now (as I need to provide tax declaration to my company by this month end itself). Thanks once again.