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Home loan interest deduction

27 October 2012

I took a home loan in November 2010 and am expecting the delivery of the flat in June 2015.

1.Since this is post the 3 year period as mentioned u/s 24b, I wanted to know that once I get pocession of the flat in 2015 and start staying in it, as per current laws will I be allowed to claim a deduction of INR 150,000 or 30,000.

2. Will I be allowed to claim any dedection with respect to the pre emi paid by me till the time of pocession.

3. In case I can claim both of the above, what are the individual amounts against which I can claim deductions?

Thanks.

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11 Replies

CALTON DENNIS (Article Assistant) (147 Points)
Replied 27 October 2012

Housing loan interest deduction, on the other hand, is allowed up to a maximum amount of Rs 1,50,000 under section 24(b). However, the acquisition or construction of the house property should be completed within 3 years from the end of financial year in which home loan was taken; otherwise, the amount of interest benefit allowed is only up to Rs 30,000.
Furthermore, the above tax deduction limit u/s 24(b) is applicable only for self-occupied house property. In case of let-out or deemed to be let out house property, interest is deductible without any limit.

Hope it will help but see for other suggestions also

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SUNILKUMAR WADHWANI (Chartered Accountant) (320 Points)
Replied 27 October 2012

IN YOUR CASE YOU CAN TAKE DEDUCTION OF INTEREST AFTER COMPLETION/ACQUISITION OF HOUSE/FLAT.

AT THAT TIME YOU WILL TAKE DEDUCTION OF ACTUAL INTEREST PAID AT THAT TIME & PRE-CONSTRUCTION INTEREST(PROPORTIONATELY IN 5 YEARS).

AS YOU ARE GOING TO GET ACQUISITION OF FLAT IN 2015 i.e AFTER 3 YAERS. THE MAXIMUM LIMIT OF INTEREST DEDUCTION YOU CAN TAKE IS RS-30,000/-.

FOR MORE DETAILS READ SECTION 24(b) OF IT ACT 1961

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Saket Sinha (Student) (129 Points)
Replied 27 October 2012

U can show house as deemed let out and claim deduction without any limit.

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 27 October 2012

1. Since its a self occupied property, you will allowed a deduction maximum upto Rs. 30000

2. Interest has to be allocated in two parts. Part I pertains to the period from date of availing loan to the end of financial year previous to FY in which you will get possession. i.e. if you taken loan in 15th april, 2010 and possesion is going to receive on 12th june 2015, then interest has to be calculated for the period 15.04.2012 to 31.03.2015. Such interest termed as Pre-Construction Interest and will be allowed as deduction in five years starting from the year in which possession taken. Thus for first part interest you will get 1/5th equated pre construction interest for FY 2015-16 onwards till FY 2019-20

second part of interest allowed as deduction denotes interest frm 01.04.2015 i.e. after pre construction period. This will be taken based on interest certificate received from Bank/financial institution.

Total of first part and second part will allowed as deduction under sec 24(b) subject to maximum of Rs. 30,000. This will solve your third query as well.

Hope this all solves your query..

Thanks and Regards,

Manoj B. Gavali

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Kapilesh Prakash (AGM) (25 Points)
Replied 28 October 2012

So if I understand correctly, if I stay in the flat I can claim a maximum deduction on home loan of INR 30,000 - including pre emi interest.

However, if I rent out the flat, irrespective of how many years later I get the flat, I can claim tax rebate on the interest on home loan without any limit. Is this correct?

Also, in case rent out the flat, is there any eligibility to claim any deduction on pre emi interest? Please do keep in mind that pocession of the flat will be 5 years from date of disbursement of the home loan.

Saket Sinha (Student) (129 Points)
Replied 28 October 2012

Yes , if you show your flat as deemed let out then you can claim interset deduction without any limit. including pre construction period interest

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 28 October 2012

Limit of interest deduction is for self occupied property.i.e. property which is not rented, if you rented property, then no limit on maximu amount of interest deduction under section 24(b).

Calculation of pre construction interest and its allowawibility is same for both elf occupied and rented property. so pre construction interest would be admissible as provided in my earlier reply.