Yes interest on loan u/s 24 can be availed even if it is not rented. However there are certain T&C:
Interest on borrowed capital is allowable as deduction on accrual basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property.
Interest includes service fees, brokerage and commission.
Interest on unpaid interest shall not be allowed as deduction.
Deduction shall be allowed irrespective of the nature of loan whether it is housing loan or personal loan from any person/institution.
If a person instead of raising a loan from a third party pays sale price to the seller in installments along with interest than such interest is also allowable.
Maximum Limit of deduction
1) In Let Out Property/Deemed to be Let Out – No maximum limit
2) Self Occupied House (SOP) – Rs. 2,00,000. (1,50,000 for A.y 2014-15 and before)
In the following cases the limit of Rs 2,00,000 shall be reduced to Rs. 30,000
Loan borrowed before 01-04-1999 for any purpose related to house property.
Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.
If construction/acquisition is not completed within 3 years from the end of the financial year in which capital was borrowed.
Interest for pre construction/acquisition period
Interest for pre construction/Acquisition period is allowable in 5 equal installment beginning from the year of completion of house property. This deduction is not allowable if the loan is utilized for repairs, renewal or reconstruction.
For Ex :- If house property is completed on 21st March 2012 then the deduction is allowed from Financial Year 2011-2012 to 2015-16.
Pre Construction/Acquisition period starts from the date of borrowing and ends on the last day of preceding Financial Year in which the construction is completed.
For Ex: – Loan Taken on 01-05-2006 of Rs. 5,00,000
Construction End on 07-09-2012.
Pre Construction/Acquisition Period = 01-05-2006 to 31-03-2012
Pre Construction/Acquisition Interest = Rs 3,55,000 ( Rs 5,00,000*71 Months*1%)
Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 = Rs 71000 ( 355000/5 )
Interest from 01-04-2012 to 31-03-2013 shall be allowed as deduction in current Financial Year. (Interest from 01-04-2012 to 07-09-2012 shall not be considered as Pre Acquisition/Construction Period.
Other Points:-
1) If a property is partly SOP and partly let out then also the limit of Rs 2,00,000/30,000 shall be available for SOP portion and there is no limit of deduction for let out portion.
Interest on home loan is allowed under section 24b while principal on home loan is allowed under section 80C. A comparison between section 24 and 80C is given here under:-
|
| Particulars |
Section 24 |
Section 80C |
| Tax Deduction allowed only for |
Interest |
Principal |
| Basis of Tax Deduction |
Accrual Basis |
Cash Basis |
| Amount of Deduction |
Self occupied property : Rs. 2,00,000 (From assessment year 2015-15)
Other than Self occupied property : No limit |
Rs. 1,50,000 (From assessment year 2015-16) |
| Purpose of loan |
Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property. |
Purchase / Construction of a new House Property |
| Eligibility for claiming Tax deduction |
Purchase/ Construction should be completed within 3 years |
NIL |
| Restriction on Sale of Property |
NIL |
Tax Deduction claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by him. |
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