Friends,
Deduction of interest from house property income , specially when it is self occupied by a person , remains one of the most often asked question. In past , this site has answered many question on deduction of interests and principal amount of loan repayment . However, the content of the query raised by one of the Readers highlighted that many new house buyer may not be giving attention to a small condition which , if not fulfilled , can take away a very big benefit from the house owner. Here is the question :
“I want to know the rules to take Tax benefits related to Home Loan repayment under Section 24. I have been paying Pre EMIs on my home loan since June 2006. I have received possession of the house this year on 1st January 2011. I have been paying Rs 1,50,000/year as Pre EMI. Now once i submit possession letter to the bank i shall be able to get my EMIs started. Please educate me as to how can i claim exemption under the head “Income from house property” for the total interest paid in Previous year(1,50,000 * 5) + interest that i will be paying in the upcoming years while i do the repayment of my loan. “
Here are rules of deduction of interest u/s 24 of the I T Act.
1. Interest is allowed as deduction without any limit in case of let out properties.
Deduction of interest from house property income , specially when it is self occupied by a person , remains one of the most often asked question. In past , this site has answered many question on deduction of interests and principal amount of loan repayment . However, the content of the query raised by one of the Readers highlighted that many new house buyer may not be giving attention to a small condition which , if not fulfilled , can take away a very big benefit from the house owner. Here is the question :
“I want to know the rules to take Tax benefits related to Home Loan repayment under Section 24. I have been paying Pre EMIs on my home loan since June 2006. I have received possession of the house this year on 1st January 2011. I have been paying Rs 1,50,000/year as Pre EMI. Now once i submit possession letter to the bank i shall be able to get my EMIs started. Please educate me as to how can i claim exemption under the head “Income from house property” for the total interest paid in Previous year(1,50,000 * 5) + interest that i will be paying in the upcoming years while i do the repayment of my loan. “
Here are rules of deduction of interest u/s 24 of the I T Act.
1. Interest is allowed as deduction without any limit in case of let out properties.Section 24 for ready reference is as under
24. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:-(a) ………………….(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed , the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees
Your case
Year of borrower of loan : FY 2006-07
Year of completion : FY 2010-11
Which clearly not as per provision of the law as the enhanced ineterest for self occupied is allowed for house which is completed within 3 years from the end of financial year in which loan was taken. Therefore, in your case , interest of Rs 30,000 only is allowed for a year.
You have not given the break up of interest and principal in Rs 1,50,000 which you pay every year. Therefore , exact amount can not be told which is allowed to be tax free.
But as per the proviso to section, total interest deduction is limited to Rs 30,000.
Principal amount
Principal amount deduction is allowed u/s 80C and total deduction u/s 80C is limited to Rs 1,00,000. If you have no saving on PF or NSC or LIC etc, you can claim the principal amount for The FY 10-11 u/s 80C up to Rs 1,00,000.
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