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Housing loan repayment deductions

manisha grover (CA Finals ) (61 Points)

18 January 2015

Hello everyone

My client have taken a home loan along with his mother.

the ownership is in name of his mother but as the bread earner he has first name in loan.

now the question arises being a co borrower whether deduction under 24b for repayment of housing loan interest and under section 80c for repayment of principal amount would be allowed or not?

Thanks in advance!

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9 Replies

Anusha (student) (25 Points)
Replied 18 January 2015

He should be a co-owner of the property.

manisha grover (CA Finals ) (61 Points)
Replied 18 January 2015

Whether there's any tax planning scope ? If any please describe. Thanks in advance

anil jain (Partner) (1067 Points)
Replied 20 January 2015

see section 80 (xviii). there is no requirement of being owner or co-owner.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 04 February 2015

Hello,
A co-owner, who is not a co-borrower, is not entitled to tax benefits. Similarly, a co-borrower, who is not a co-owner, cannot claim benefits.

NIhar Samanta (Service) (23 Points)
Replied 22 March 2015

HI,

I bought a property in bhubaneswar but I stay in Mumbai due to my job. agreement date in 14-07-2014 and possession is expected in 07-2017. Can I claim deduction on total interest paid in FY17-18+1/5th of interest paid between FY14-15 till 06-2017 ?

Thanks

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 22 March 2015

Hello Nihar,

what is that as per Income Tax Act Pre-Construction period means?

It’s very simple! Total interest paid up to the end of financial year, immediate proceeding to the year in which house is completed. For example: a loan was taken on December 2010 and the construction of the house gets completed on September 20, 2013, in that case pre -construction Interest is taken from December 2010 to March 2013. Fyi, even if house is completed on March 31, 2014 then also the pre-construction Interest is considered from December 2010 to March 2013.

In your case 1/5 of interest paid between July-2014 to March 2017.

NIhar Samanta (Service) (23 Points)
Replied 24 March 2015

Thanks a lot vishal, that was really helpful. Regards Nihar

NIhar Samanta (Service) (23 Points)
Replied 24 March 2015

I had another query , that is, can I claim deduction on entire interest paid during fy 2017-18, which could be more than 2lakhs or allowable as per latest finance bill, as I have property at bhubaneswar and I am staying in mumbai for my job.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 26 March 2015

The Interest that has been paid before the completion of construction should be aggregated and the whole aggregated amount shall be allowed as tax deduction in 5 equal installments for 5 successive Financial Years starting from the year in which the construction has been completed.

The pre-construction interest is allowed upto a limit of Rs 2 Lakhs including the current year interest payment on home loan. This can be claimed only after the house is ready and possession is taken over. If the house has been let out, the taxpayer can claim the entire interest component as deduction from the rental income without any restriction.