Income Tax Benefits from House Property and Loan

Buying a House is nowadays
is not easy considering the multifold hikes in property price in last 10-12
Years. It becomes almost impossible for middle and lower class to buy an house
and those buying the house also finds it difficult to buy the same
from their own saving without obtaining a home loan. Home loan becomes
necessity to Purchase a house.

In this article we will
discuss the tax benefits which one can avail under the Income Tax Act,1961 on
Purchase of House property  (Including the Expenses on Stamp
Duty and Registration expenses) and on Repayment of Home loan
(Including Interest).  We will mainly discuss the Tax benefit available
mainly under Section 24(b), Section 80EE and Section 80C of the Income Tax Act,
1. Income Tax Benefit
on Home Loan Interest under Section 80EE Of Income Tax Act  – 
of this section can be  availed by Individual assessee.
Deduction under this section is not available for any other assessee (like HUF,
firm etc.). Individual can claim benefit under this section only when all the
following conditions are satisfied, these are-
·    Purchaser should be first time buyer. i.e. he has
never purchased any house and now he is going to purchase a house.
·    Value of the house should not more than 40 lakh.
·    Loan taken by Individual for the purpose of buy 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.
can take deduction u/s 80EE on interest payable on home loan upto 1 Lakh in
A.Y.2014-15. It can claim deduction in two assessments year. Means if whole
amount of interest payable upto 1 lakh is not claim as deduction in A.Y.2014-15
then remaining balance amount upto 1 lakh can claim in A.Y.2015-16.Total
deduction under this section shall not be more than 1 lakh.
2. Section 80C for
Investment in Residential House Property and for payment of Principal amount –
Equated Monthly Installment (EMI) that you pay every month to repay your
home loan consists of two components – Principal and Interest. The
principal component of the EMI qualifies for deduction under Sec 80C.
Further Amount paid towards
stamp duty, registration fees and other expenses for the purpose of transfer of
house property to the owner also qualifies for tax exemption’. This is over and
above the principal payment that qualifies under Section 80C. But deduction
u/s. 80C for  total amount including Principal Loan Repayment and stamp
duty and registration charges
 can not exceed Rs. One Lakh Fifty
Thousand (Rs. One Lakh up to A.Y. 2014-15).
Section 80C provides
that in computing the total income of an assessee, deduction shall be provided
in respect of various payments/investments made as included in the Section 80C
subject to a ceiling of Rs. 1.50 lakh on the aggregate amount of such
3. Section 24(b) -Deduction
of Interest on Borrowed Capital From House Property income
This deduction is allowed only in case of  house property which is owned
and is in the occupation of the person for his own residence. However, if it is
actually not occupied by the one in view of his place of the employment being
at other place, his residence in that other place should not be in a building
belonging to him.
The quantum of deduction for
home loan interest is as per table below:
Purpose of borrowing capital
Date of borrowing
Maximum Deduction
Repair or renewal or reconstruction of the
Any time
Rs. 30,000/-
Acquisition or construction of the house
Before 01.04.1999
Rs. 30,000/-
Acquisition or construction of the house
On or after 01.04.1999
Rs. 2,00,000/- wef A.Y. 2015-16.Rs. 1,50,000/- up to
A.Y. 2014-15
In case of Serial No. 3
(a) The acquisition or
constructing of the house should be completed within 3 years from the end of
the FY in which the capital was borrowed.
(b) Further any prior
period interest for the FYs upto the FY in which the property was acquired and
constructed shall be deducted in equal installments for the FY in question and
subsequent four FYs.

(c) The
Assessee has to acquire before  a certificate from the person to whom any
interest is payable on the borrowed capital specifying the amount of interest
payable. In case a new loan is taken to repay the earlier loan, then the
certificate should also show the details of  Principal and
Interest of the loan so repaid.
RECOMMENDED READ  CBDT circular on calculation of TDS on salary for FY 2014-15

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