A house loan repayment has two components – principal and interest – and both of these components are treated differently for tax benefit calculation purposes.
The principal amount is covered under Section 80C and has a Rs. 1 lakh limit. In order to claim the tax benefit under 80C the house should already be constructed, and should be a residential property.
Section 24: Tax Benefit on the Interest On Home Loan
The interest on the home loan is treated differently, and Section 24 deals with the tax aspect of the interest on house loan repayment.
The maximum limit under this section is Rs. 1,50,000 and you don’t have to actually live in the house to claim this benefit.
The interest payment is deducted from your taxable income and thus reduces your tax liability. There is no limit on the number of houses you can claim this as well as the location of the houses. The only limit is Rs. 1,50,000 on the whole amount.
There are special conditions like when you get the loan disbursed before the construction of the house and pre – EMI interest and Raag has covered these aspects in a lot of detail in his post about tax benefits of a home loan which you can read if you were interested in those details.
Correction: An earlier version of the article stated that the 80C deduction is only available if you are living in the house. CA Karan Batra notified me that you don’t have to live in the house to claim deduction. Apologies for the mistake.Â
Dear Sir,
I have taken a loan 50 % on my name and balance on my mother’s name . I have purchased a house by that loan. since beginning i am paying whole EMI through my account.
whether i am eligible to take deduction of principal and interest on both loan or only on my loan.
Ajay
Hi,
I have couple of questions on availing tax benifit on home loan.
I have a flat and I am paying EMI and claiming one Lakh on principle and 1.5 L on the interest payment.
Now I bought another house for which i have started paying EMI. How can I claim tax benifit on the second house. I am living in the first house and not yet given the second house for rent.
Apreciate your reply on this. Thanks!
Murali..
I have some queries related to home-loan
(1) In the year that I sell away a house, is the tax relief on home-loan interest available to me? If yes, in case it was self-occupied do I get the full benefit on interest up to 150000 (or is it in any way proportional to the number of months in owned in that FY)?
(2) I have two houses in different cities, A and B. My parents live in A and I live in B. Can I arbitrarily choose to declare “A” as self-occupied and “B” as let out? I understand that I will need to show a “notional annual value” for B in Form 12(c) but the question here is whether it is acceptable norm to arbitrarily choose one of my properties as self-occupied and the rest as let-out?
I have a flat in MiraRoad,Thane where I am staying now and home loan for this is over.
I am planning to buy a new flat in Kolkata thru home loan.
Can I claim only 1.5 lacs rebate under Section(24) or unlimited interest amount ??
If it is only 1.5 lacs – how can I get unlimited interest amount rebate – is it by renting the Kolkata flat ??
Not Exactly!
If you are planning to stay at Kolkata flat, the limit of 1.5 Lakh will apply to it.
But, if you are NOT planning to reside in your future Kolkata flat, you can claim the rebate upto any amount you pay towards interest by application of following rules:-
1. If you let it out for a rent, the annual value of the flat is to be calculated based on the rent earned/fair rent receivable from the property. Annual value, in such case, would be the highest of the Actual Rent Received and Fair/Reasonable Rent. For example, If the actual rent received is Rs. 60,000/- and fair rent/ reasonable rent/ municipal valuation is Rs.72,000/-, the annual value would be Rs. 72,000/- for the purpose of the Income-tax Act.
(Annual value is nothing but the rent earning capacity of the property. The terms “fair rent”, “reasonable rent” and “municipal valuation” are synonyms, which are to be taken to mean the rent prevailing in the area wherein the property is situated.)
2. If it is vacant, Annual value would be Fair/ Reasonable Rent.
3. However, if a property is let and was vacant during any part or whole of the year and due to such vacancy, the rent received is less than the fair rent/ reasonable rent, then such lesser amount shall be the Annual Value. For Example, If the actual rent received is Rs. 50,000/- and fair rent is Rs.72,000/-. Here, if the property was vacant for 2 months in and the rent received i.e. Rs. 50,000/- is for 10 months, then the Annual Value shall be Rs. 50,000/-.
4. Further, you can claim rebate equal to 30% of the annual value towards repairs maintenance etc. would be allowable, irrespective of any expenditure incurred by you.
5. You can also calim rebate of the Municipal taxes actually incurred on the flat.
So the formula would be-
Annual Value xxx
Less: Home loan interest xx
Less: 30% of the Annual vale xx
Less: Municipal taxes paid xx
————————————————————
Income from house property xx
————————————————————
If the above deductions are more than the Annual Value of the property, then the differential amount will be the “Loss on House Propertyâ€, and the same is adjustible against your income from business/ profession/ salary etc.
Hope this serves your purpose!
Regards,
Jayesh Deokar
———————————————————————————————
We make a living by what we get,
what we give however makes the life!!
———————————————————————————————
Hi Jayesh,
Thanks a lot for your reply – really appreciate it.
I am a salaried person.
If I keep the Kolkata flat vacant – How do I establish the Annual Value of the property i.e. what document I need to submit to claim income tax rebate against my salary ??
Please advise.
1. You may produce the documents pertaining to transactions of some other parties in the matter of the other properties in the neighborhood, more or less comparable to your property.
OR
2. The Municipal Corporation of Kolkata will definitely determine Annual Value of your flat for the purposes of charging it with property tax. You may produce the same as a proof of valuation.
OR
3. If your property is subject to the Rent Control Act, the Annual Value of your vacant property will be the maximum rent you could legally recover from your tenant under a Rent Control Act. And in such case, you need not produce any documentory evidence.
You need to furnish all the details pertaining to the “Income/Loss from house property”, if any, to your employer (i.e. person responsible for deduction of taxes from source) in due time, so that he (the employer) will consider the same before deducting TDS from your salary.
Regards,
Jayesh Deokar
Hi,
I have take housing loan from bank of Rs.16 lakhs for constructing 1st floor ..
the house in on the name of my father and mother…but the EMI is getting deducted from my savings account..
Please suggest me how to claim for the income tax exemption for the amount I am paying for housing loan.
Housing loan being in your name and EMI being paid from your account, you can always claim exemption under IT Act under the following two heads-
1. U/s. 24 – Interest on housing loan:-
a. If the property is self occupied, you can claim upto 1.5 Lakh
b. If the property is let out, you can claim any amount paid towards interest. There is no upper limit for claiming exemption in such a case, provided you show rent income against such property.
2. Under chapter VI-A
U/s.80C – Housing loan principal repayment:-
You can claim any amount you have repaid, however, the total amount of deductions u/s.80C are restricted to Rs.1 Lakh. Thus, you cannot claim beyond that.
Regards,
Jayesh Deokar
Sir, regarding home loan, is there any limit of time for clamming Income tax rebet? i.e. Upto this much years I can claim Income Tax Rebet and after that period I cant.
There is no such limit for claiming rebate from income tax. As long as you pay your home loan principal and the interest thereon, you can claim the rebate.
Regards,
Jayesh Deokar
Can I not sell the property for 5 years if I claim benefits under section 24 b?
You can sell your property anytime you desire. But If you sell your house before the expiry of 5 yrs, all the money you saved under sec 80C in earlier years will be deemed to be your income in the year of sale and added to your income. For instance, if you bought the flat in 2009 and in next 4 yrs you saved 1 lac in tax under sec 80C, then this 1 lac will be deemed to be your income in the year of sale and will be taxed .
However interest component once saved is saved and it won’t be reversed. Thus, this rule isn’t applicable to the benefits derived u/s.24.
Regards,
Jayesh Deokar
can we club the emi intereste+1/5 th of pre emi intreset both and deduct it from rental income if the house is on rent and claim tax deduction on the resulting amount if it exceeds 150000 also?
Hi,
Please help me out in clarifying my concerns related to home loan.
1) Have running loan on 2 properties- 1 in Ghaziabad & 2nd in Delhi.
2) Possession of both the properties has been taken recently in Nov. – Dec. 2012.
3) Property in Delhi is not in livable condition.
4) Residing in a rented house in Delhi.
5) Working in Noida.
Now considering the above facts, my concern related to availing HRA & benefit of tax on principal, interest paying for both the properties are:
1) Can I avail HRA from April 2012 till Dec. 2012 i.e. till the time I got possession of Ghaziabad property?
2) Can I avail deduction of total principal paid for both the properties (Delhi+Ghaziabad) under section 80C? with a limit of 100000.
3) Can I avail deduction of total interest paid for both the properties (Delhi+Ghaziabad) under section 24? And is there any limit on the interest paid?
4) How the deduction for the interest paid before April 2012 on these 2 properties can be availed & under which head/section this amount can be counted.
Thanks,
Sandeep.
Respected Sir
Recently I’ve taken joint home loan from SBI for purchasing a constructed house.
I am the co-borrower of the home loan, my mother being the principal borrower.
Further, I am repaying the emi of the loan. The property is registered in the name of my mother only. The ikraarnaama of the property bears the name of both of us.
My query is:
Whether I am eligible for the relief under sec 24 and sec 80c of the Income Tax act?
Would you please provide me with relevant circular(s) or rule(s) in this regard?
Regards.
dear sir,
i have purchased a flat with home loan. what document do i need to produce at my office to get tax benefit. As they are asking to produce possession certificate of flat but the flat is already registered last month in my name as i have purchased ready to move flat.
Dear Sir,
I have taken home loan in joint name with my spouse for a house in our joint name. My spouse is salaried having a salary account. However the EMI is being presently deducted from my account.
Can we both claim tax benefit of Rs 150000/- separately while calculating our annual tax liabilities ?
ashok
can husand claim benefit of interest rebate for housing loan taken y his wife and he is guarantor of loan?
Hi,
I and my wife constructed house which contains 3 kitches. We both are staying in 1st floor. We had let out the Ground Floor Kitches/(2 portions) to our parents seperately for Rs.2000/-each /Month. My salary is 8 Lacs and my wife is 7.5 Lacs. Its a joint loan & joint property. The annual interest is 5Lacs & the Principal amount is 70000. We would like to divide the tax benefit equally. How can we get maximum tax benefit out of this case. Pls suggest
If both of you pay the loan installments equally, then it is advisable to treat the 50% of the loan principal and interest in your account and 50% in that of your wife. Doing this, you will be able to claim maximum exemption u/s. 80 (Rs.100000 x 2) and u/s. 24 (Rs.150000 x 2), and that too within the four corners of the IT Act, since the property and loan both are joint.
Hi,
While i live in Delhi, I am purchasing a flat in Bangalore. The flat is slated to be ready for possession in Jan 2014
I am taking a loan of 21 L in Jan 2013 with 3 year tenure paying an interest and principal of:
Yr 1: 190837 & 628224 respectively
Yr 2: 121605 & 697457 respectively
Yr 3: 44743 & 774319 respectively
My annual compensation is 50 L pa
What tax benefit can i claim for the above?
HI,
I am buying a flat and making my wife as Co-Owner. I am taking loan on my name as she is house wife. I want to know while taking TAX benefit may I eligible for both principal amount 100000 per year and interest amount 150000 per year OR I can only be eligible for half amount(principal and interest) as I made my wife as Co-Owner so rest half benefit she only can take.
Hope you got my point.
thanks
Sir,
I have one existing home loan in one city. small loan of 5 lakhs o/s. where my inlaws are staying. so no rental. but i am showing some nominal rent received.. i am showing this in my IT all these years. Recently taken second house at another city where my parents just occupies. no rent… I am staying in another state on my job. What is my interest cap (1.5 lakh or more) . can i show the second house with out rent where my parents are staying to claim the interest benifit???
Please advise…
Regards
Sarath ,9844073704
Sir/Madam,
I have a vacant plot in the name of my wife. Now i am planning to construct a house by taking housing loan. I am an employee in one PSU and my wife is not working. Whether i am eligible for IT exemption for principal under 80C and interest under 24c? Kindly clarify.
Dear Sir, I have registered my property in March 2012 which is under construction and possesion in mid 2013 and has Home loan.
Currently, i am staying on rental basis and in different location from my booked property.. Can i claim from income tax benefit ? and what all documents i need from Builder and Banker ? Please help.
Thank You !
“If you work in a different city then you can claim exemption on the principal amount of your home loan under 80C” This statement of yours is contradicting with the statement that we can claim when we are only living in the house.
There is an exception where you can claim the deduction even if you’re not living in the same house, but that only applies if you are working in a different city.
I booked a flat in soft launch in oct 2008. The loan of rs 17,00,000 was sanctioned by lichfl in may 2011. I started paying EMI’s from Jul 2011 as interest component only.. can i claim rebate under sec-24??? because my employer says that i can only do it after the completion of the house….