Tax benefits on Home Loan as per Income Tax Act

Summary for easy reference, prepared for clients of Profit Tantra Financial Services

Frequently Asked questions on Home loan :

Income Tax sections applicable :

Sec 80C  : for principal amount

Sec 24    : for repayment of interest 

Q-1 What are Income tax benefits of taking  and repaying a housing loan under EMI Plan?

You will be eligible to claim both the interest and principal components of your repayment during the year. (You can claim this interest only when you are in possession of the house)

Sec 80 : Principal can be claimed up to the maximum of Rs. 150,000  (Rs. 100000/- up to A.Y. 2014-15) under Section 80C. This is subject to the maximum of Rs 150,000 (Rs. 100000/- up to A.Y. 2014-15) across all 80C investments.

 Obtain statement from lender/banker showing the repayment for the year with breakup of interest & principal component

Sec 24 : Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 200,000 (Rs. 150000/- up to A.Y. 2014-15) or the actual interest repaid whichever is lower.

Q-2 If I buy a house jointly with my wife and take a joint home loan, Can we both claim income tax deduction?

Ans:-Yes, if your wife is working and has a separate source of income, both of you can claim separate deductions in your income tax returns.

Repayment of principal amount up to :  1.5 lakhs

Interest on loan upto :  2 lakhs  

Both co-owners can claim deductions in the ratio of ownership.

Q- 3 I plan to buy a house by raising loans from friends and relatives. Will I be eligible for tax benefit from all sources?

Ans: – 

Principal payment:

Is not eligible for deduction as per income tax act if loan is taken from friends and relatives, deduction is allowed on principal payment only if loan is obtained from banks and notified institutions

 Interest payment:

 Is allowed on receipt of certificate confirming payment of interest from friends and relatives.

 Q- 4 .  Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA) ?

If you took a home loan and are still living in a rented place, you will be entitled to:

Tax benefit on principal repayment under Section 80C

 Tax benefit on interest payment under Section 24

 HRA benefit covered under section 10(13A) and rule 2A

For detailed analysis on HRA (please check write up on HRA)

Q- 5.  I have a home loan in which I am a co-applicant. However, the total EMI amount is paid by me. What is the total income tax exemption that I can avail of ?

Full tax exemption can be claimed if you are paying the EMI, provided you are the owner/co-owner of the property

Q- 6.  I have two housing loans on two different properties. Can I get tax rebate under sec 80 C of both the loans?

Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled to will be a total of Rs 150,000 (Rs. 1 Lakh  up to A.Y. 2014-15) across both the homes.

As for Section 24 deduction, on your self occupied house you can take advantage of interest payments up to Rs.2,00,000  (for A.Y. 2015-16 ).  For the other property, you can claim actual interest repaid, there is no limit for the same.

Q- 7. I live in Bangalore in my own house. In Jan 2014, I took a housing loan to fund the purchase of an under-construction flat in Chennai. It is expected to be completed in FY 2017. I haven’t claimed any tax benefit so far. What happens to the loan installments I have paid so far? Can they also be claimed for tax benefit?

Please refer the diagram below :

 Q. 8 Is there any additional deduction which I can claim in respect of Interest on Housing loan in addition to interest Under Section 24(b)?

Ans. Yes, in section 80EE of income tax act.

 Benefit of this section can avail by Individual assessee.

 When all the following conditions are satisfied:

·         Purchaser should be first time buyer.

·         Value of the house should not be more than 40 lakh.

·         Loan taken by Individual for the purpose of buying a house should not be more than 25 lakh.

·         On the date of sanction of loan individual does not have any own residential house property.

·         Loan for this purpose taken by individual should be from the Financial Institution or Housing Finance Company.

For this purpose, loan should be sanctioned between 01.04.13 to 31.03.14

Any query feel free to mail at niraj@profittantra.com or call at 99167-40560