Home Loan and Deductions
House Property Income is one of the tax heads of income, stated in Income Tax act. This is the only type of income which taxes existing income (except income from capital gains, other sourced incomes). Union government provides incentives as interest subventions, Income tax exemptions, and rebates.
According to Section 23(2) (A) house property is termed as self-occupied property, where such property or part thereof:
Is occupied as the owner for the purpose of his own house. And not actually let out during the whole or any part of the previous year, and there should be no other benefits.
Deduction of Taxes on Home Loans
Section-24 – Deductions on Home loan interest:
- Can claim deduction up to 2 Lakhs on home loans interest if the individual is staying in the same residence.
- And if it is rented property, a claim will be limited to 30000. Fulfill these clauses to claim 2 Lakhs.
- A home loan must be to construct a new property and should be completed by the end of 3rd FY from the year loan taken. And if not, the deduction will be limited to 30000.
- Applicable only to the loans issued after April 1999.
You cannot claim tax deductions when the house is under construction. This period is called a pre-construction period. During this time, if interest paid, you can claim the tax deduction in five installments starting from the year of construction to a new Property.
Section 80C – Deductions on Principal Repayment:
- Can claim deduction up to 1,50,000 utmost limit of section-80C.
Clauses to fulfill:
- A home loan must be to construct a new property.
- You should not sell the property in the next five years.
Expenses like stamp duty and registration charges and other expenses which are involved can also be added to claim the deduction.
Section 80EE – Deductions for first-time property owners – Tax benefit up to 1 Lakh.
Clauses to fulfill:
- Loan not exceeding more than 25 Lakh & property value 40 Lakh respectively.
- On the date loan issued, the individual should not be an owner than a single property.
NRI’s can also claim this deduction. There are no specifications mentioned in the Income-tax Act.
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