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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, 1961.

1. Income Tax Benefit on Home Loan Interest under Section 80EE Of Income Tax Act  – Benefit 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.
     Assessee 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 –The 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 payments/investments.

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 above
(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.

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