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http://www.charteredclub.com/tax-benefit-on-home-loan/
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A very important criterion to be kept in mind while taking a Home Loan is the Tax Benefit on Home Loan. To
explain the Tax Benefit on Home Loan, we would be dividing the Repayment of Home Loan into 2 components:1. Repayment of the Principal Amount
2. Repayment of the Interest on Home Loan
As the repayment comprises of 2 different components, the tax benefit on home loan is governed by different sections of
the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax
Return.
Recommended Read: Efiling your Income Tax Return online for Free through Govt Website
The Sections under which Tax Benefit on Home Loan can be claimed are explained below:-
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has been obtained by him, then no deduction and tax benefit on Home Loan shall be allowed under Section 80C. The
aggregate amount of tax deduction already claimed in respect of previous years shall be deemed to be the Income of the
Assessee of such year in which the property has been sold and the Assessee shall be liable to pay tax on such income.
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basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment
has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Moreover, if the property is not acquired/constructed completed within 3 years from the end of financial year in
which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only.
The Quantum of Deduction allowed for payment of Interest on Home Loan under Section 24 has been summarized
below:Quantum of Deduction allowed for Payment of Interest on Home Loan under Section 24
Type of
Property
Completion
Status
Completed within 3
years
Completed within 3
years
Deduction
Allowed
Rs. 1,50,000
Rs. 30,000
No Limit
No Limit
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from House Property is allowed to be set-off against income from various other heads in the same Financial
Year.
5. In case the loss cannot be set-off against income from other sources in the same financial year, the loss can be
carried forward to future years and set-off against income arising from House Property for the next 8 financial
years.
6. Tax Benefits of Interest on Home Loan can be claimed only by the person who has acquired or constructed the
property with the Borrowed Funds. It is not available to the Successor of the Property.
For the purpose of simplicity and easy understanding, a comparison of Tax Benefit on Home Loan under Section 24
and Section 80C has been made here under:Particulars
Section 24
Tax Deduction allowed for
Interest
Basis of Tax Deduction
Accrual basis
Quantum of Tax Deduction Self Occupied Property:Rs. 2,00,000Non
allowed
Self Occupied Property: No Limit
Purpose of Loan
Purchase/ Construction/ Repair/ Renewal/
Reconstruction of a Residential House
Property.
Section 80C
Principal
Paid basis
Rs. 1,50,000
Purchase / Construction of a new
House Property
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The Budget 2013 also brought in another amendment relating to real estate and as per the new amendment, TDS on
Property would be liable to be deducted @ 1%.
Recommended Read: TDS on Property @ 1%
The above 3 Sections relating to Tax Benefits on Home Loans have been summarised as under:Particulars
Section 24
Section 80C
Section 80EE
2,00,000
No Limit
1,50,000
1,50,000
1,00,000
1,00,000
Please Note:1. The above tax deductions are per person and not per Property. So in case youve purchased a property jointly
and have taken a joint home loan, each person repaying the amount would be eligible to claim whole deduction
separately.
2. If you are living in a rented premise and are taking Tax Benefit of HRA Allowance, even then you can claim Tax
benefit on home loan under Section 24, Section 80EE & Section 80C.
For claiming the above tax deductions, you would be required to furnish the statement provided by the lender clearly
indicating the amount payable and paid towards Interest and Principal. After claiming the above deductions of Tax
Benefit on Home Loan, the balance Income of an Individual would be taxed as per the Income Tax Slab Rates.
(Recommended Read: Income Tax Slab Rates)
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