Hi,
I am a salaried professional. I am looking to purchase an apartment in an ongoing project in Lucknow. My quaries are:
1. How can I avail tax benefits on interest payble.
2. What are the sections dealing with tax benefits.
3. I have no other loan as of now. What is the procedure to avail maximum tax benefits on home loan.
As the repayment home loan comprises of 2 different components(Principal & Interest Amount), the tax benefit on home loan is governed by different sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.
Section 80C: Tax benefit on Home Loan (Principal Amount)
The amount paid as Repayment of Principal Amount of Home Loan by an Individual/HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs. 1,50,000.
This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made.
However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded. No deduction would be allowed under this section for repayment of principal for those years during which the property was under construction.
Section 24: Income Tax Benefit on Interest on Home Loan
As per Section 24, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.
The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs.
In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.
It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Moreover, if the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only.
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