Interest on housing loan - Deduction

Dear Rachit

There is no criteria as such... There is no correlation between the amount of funds invested out of own pocket and the loan taken... You can claim deduction for the  loan taken irrespective of the amount invested out of your pocket

Dear Neha

Actually the loan taken is for purchase of a vacant plot of land without any construction upon. To avail benefit of sec.24(b) a house is mandatorily required. This deduction is not available for purchase of vacant land.

Hence my query was whether a very small house constructed on this land would make the person eligible for the deduction?

No. You get no tax breaks if you take a loan to buy a plot of land.

But, if you take a loan for construction, that means a loan to build a house on that plot of land, then you can get a tax break.

In such a case, the tax benefits are available on both portions of the loan – the one to purchase the plot and the one taken to construct the house thereon. 

Let's say you took a Rs 5,00,000 loan to buy a plot of land and a year later you took a Rs 3,00,000 loan to construct. Now the total amount will be combined and you will get the tax benefit on the entire amount.

No. If you take loan only for land purchase, you are not eligible for any IT benefits.

If you take a composite loan (land and house construction), only after the completion of the construction will you be eligible for income tax benefits.

No Exemption if purchase of Plot, coz, simple, if he purchases, then claims, and sells it then IT Dept is at loss

So this is applicable only on Home loan and that too you should be possesion of the house, you can claim HRA if you are not Resiing in that House.

Now, Home loan is coverd under 80C where :

Interest paid can be claimed upto Rs.150000 or actual paid whichever is less

Principal amount can be upto Rs.100000

Dear Rachit

He can claim deduction for housing loan u/s 24 b, if he manages to take a IT certificate from Financial Institution from where he has taken the loan, The mechanism goes as follows:

The financial institution which has first given a loan for plot purchase, changes the nomenclature of Plot loan to Home Loan at the time of disbursing the loan for construction,by taking over earlier plot loan and booking entire amount as hl.

Eg If Mr X has taken 10 lacs for plot purchase of 1000 sq ft plot, now he wishes to take 2 lacs to contruct around 250 sq ft, the financial institution, can give a fresh Hosuing loan of 12 lacs by taking over loan of 10 lacs and booking the case as Home loan.