Question 1: Whether any deduction are available if we have purchase a House on Loan?
Answer: Yes, For Principal repayment we can take deduction u/s 80C & for Interest paid we can take deduction u/s 24 & u/s 80EE.
Question 2: What is the maximum amount of deduction of principal repayment u/s 80C?
Answer: The maximum amount of deduction is Rs. 1,50,000 in a year but loan should be taken by assesse from the followings:
- The Central Government or any State Government;
- Any Bank including a Co-Operative Bank;
- The Life Insurance Corporation;
- The National Housing Bank;
- Any Public Company formed & registered in India with the main object of carrying on the business of providing long term finance for construction or purchase of house in India for residential purpose which is eligible for deduction u/s 36(1)(viii);
- Any Company in which the public are substantially interested or any cooperative society engaged in the business of financing the construction of house;
- The assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State ACT;
- The assessee’s employer where such employer is a public company or public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society.
Question 3: Who is eligible to claim tax deduction on home loans?
Answer: The owner of the Property can claim tax benefits. In case of joint loan, both parties can claim of deduction for their share of the loan they paid.
Example: Suppose a loan has been taken of Rs. 10 lakhs in the name of Mr. A & Mrs. A & both having 50% shares each. The principal payment is Rs. 1,80,000 then both are eligble for deduction u/s 80C i.e. Rs. 90,000 each.
Question 4: Whether we can claim deduction for payment of Stamp Duty & Registration Fees?
Answer: Yes, You can claim the deduction u/s 80C.
Question 5: What is the amount of deduction of interest paid u/s 24?
Answer: It is Rs. 2 lakhs (for Self-Occupied House) & No limit (for let-out property).
Question 6: What is the amount of deduction of interest paid u/s 80EE?
Answer: Interest Payable on loan or Rs. 50,000 whichever is less. (Actual Interest paid is not relevant).
Example: Interest Payable on Loan is Rs. 60,000 then deduction u/s 80EE is Rs. 60,000 or Rs. 50,000 whichever is less i.e. 50,000 deduction will be allowed in this example.
Question 7: Who is the eligible assesse u/s 80EE?
Answer: Eligible Assessee is Individual (Resident or Non-Resident or both).
Question 8: What are the conditions u/s 80EE?
Answer: These are as follows:
- The Loan has been sanctioned by the financial institution between 01.04.2016 to 31.03.2017. Actual disbursement of loan is not relevant.
- The amount of loan sanctioned does not exceed Rs. 35 lakh.
- The purchase price of house does not exceed Rs. 50 lakh.
- The assesse does not own any residential house property on the date of sanction of loan.
Question 9: Whether any lock in period for sell of house?
Answer: Yes, You can’t sell the house within 5 Years of Possession otherwise you have to reverse the amount of deduction taken earlier u/s 80C & it will be added in your income in the year of sale. There will be no impact in this case on interest deduction.
Example: Suppose Mr. A has purchase a house on 01.01.2015 & Mr. A sells the house dt. 10.01.2020 then there is no need to reverse the deduction allowed earlier & if in this example if Mr. A sells the house dt. 04.10.2019 then Mr. A has to reverse the deduction in the Previous Year 2019-20.
Question 10: can we take tax benefits on a property purchased which is still under construction?
Answer: You can’t claim tax deductions till the construction is completed.
Example: Suppose Mr. Y has purchase a House Property in Preet Vihar, Delhi for his residential purpose dt. 15.04.2016. The total purchase price of House is Rs. 50 lakh.Mr. Y has taken a loan of Rs. 32 lakh from Bank of Baroda dt. 25.4.2016 & balance Rs. 18 lakh has paid through cheque from his savings. In F.Y-2019-20 Mr. Y has paid 4,75,000 to Bank of Baroda which contains Rs. 2,15,000 as principal & Rs. 2,60,000 as Interest. Rs. 1,50,00 will be allowed as deduction to Mr. Y for House Loan Repayment u/s 80C. Interest Rs. 2,00,000 will be allowed under Income from House Property showing Nil Gross Annual Value u/s 24 & Rs. 50,000 will be allowed as deduction from Gross Total Income u/s 80EE.