Dear All,
Q-1 What are Income tax benefits of taking and repaying a housing loan under EMI Plan?
Ans:You will be eligible to claim both the interest and principal components of your repayment during the year.
• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)
• Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.
• You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.
Q-2 If I buy a house jointly with my wife and take a joint home loan, Can we both claim income tax deduction?
Ans:-Yes, if your wife is working and has a separate source of income, both of you can claim separate deductions in your income tax returns.The repayment of principal amount of the loan can be claimed as a deduction under section 80C up to a maximum amount of Rs.1 lakh individually by each co-owner.
In cases where the house is owned by more than one person and is also self-occupied by each co-owner, each co-owner shall be entitled to the deduction individually on account of interest on borrowed money up to a maximum amount of Rs. 1.5 lakh. If the house is given on rent, there is no restriction on this amount. Both co-owners can claim deductions in the ratio of ownership.
Q-3 My husband and I have jointly taken a home loan. He pays 75 percent of the EMI. What will be our individual tax benefits?
Ans: – As you have taken a joint home loan, both of you are eligible for tax exemption for your share of the EMI paid. For claiming income tax deduction, the EMI amount is divided into the principal and interest components. The repayment of the principal amount of loan is claimed as a deduction under section 80C of the Income Tax Act up to a maximum amount of Rs. 1lakh individually by each co-owner. The repayment of the interest portion of the EMI is also allowed as a deduction under section 24 of the Act, which is given under the head “income from house property”. In case you are living in the house for which home loan is taken, both of you shall be entitled to deduction in the ratio (3:1) on account of interest on borrowed money up to a maximum of Rs. 1.5 lakh individually. If the house is given on rent, there is no restriction on this amount and both co-owners can claim deduction in the ratio of ownership- 3:1 in your case.
Q- 4 plan to buy a house by raising loans from friends and relatives. Will I be eligible for tax benefit from all sources?
Ans: – No, you can not get the tax benefits on housing loan, u/s 24 and Sec 80 C. It is advisable to borrow the loan from any financial institution to avoid the confusion.
Q- 5 What are the tax benefits that I can avail of for repaying a home loan ?
Ans: – You will be eligible to claim both the interest and principal components of your repayment during the year.
• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)
• Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.
• You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.
Q- 6. Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA)?
Ans: – If you took a home loan and are still living in a rented place, you will be entitled to:
1. Tax benefit on principal repayment under Section 80C
2. Tax benefit on interest payment under Section 24
3. HRA benefit
Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.
Q- 7. I have a home loan in which I am a co-applicant. However, the total EMI amount is paid by me. What is the total income tax exemption that I can avail of?
Ans: – Yes, you can claim income tax exemption if you are a co applicant in a housing loan as long as you are also the owner or co owner of the property in question. If you are only person repaying the loan, you can claim the entire tax benefit for yourself (provided you are an owner or co-owner). You should enter into a simple agreement with the other borrowers stating that you will be repaying the entire loan. If you are paying part of the EMI, you will get tax benefits in the proportion to your share in the loan.
Q- 8. I have two housing loans on two different properties. Can I get tax rebate under sec 80 C of both the loans?
Ans: – Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled to will be a total of Rs 100,000 across both the homes.
The interest paid on a home loan is not directly deductible from your salary income for either of your flat loans. Income from house property will be calculated for each flat you own. If either of theses calculations shows a loss, this loss can be set off against your income from other heads.
As for Section 24 deduction, on your self occupied house you can take advantage of interest payments up to Rs.1,50,000. For the other property, you can claim actual interest repaid, there is no limit for the same.
Q- 9.I live in Delhi in my own house. In 2007, I took a housing loan to fund the purchase of an under-construction flat in another city (Faridabad which comes under National Capital Region of Delhi but otherwise falls in Haryana). It is expected to be completed in FY13. I haven’t claimed any tax benefit so far. What happens to the loan installments I have paid so far? Can they also be claimed for tax benefit?
Ans: – According to the Income-tax Act, 1961, where the property has been acquired or constructed with borrowed capital, the interest payable on such capital for the period prior to the year in which the property has been acquired shall be allowed as deduction in five equal installments beginning from the year in which the property is acquired. Thus, the interest included in the loan installment paid by you during the construction period shall be eligible for deduction from the year in which the flat is acquired/construction is completed.
The principal amount of the loan repaid till date shall not be available as a deduction under section 80C till the time the construction of the flat gets completed. Once the flat is completed and the possession is handed over to you, you will be eligible to claim deduction for interest paid on the loan under section 24(b) and principal amount of loan under section 80C. The total amount of deduction available under section 80C shall be limited to Rs. 1 lakh. Thus, as of now, you are not eligible for any tax benefit on such loan repayments.
In case of any query, please feel to revert back.
From India, Gurgaon
49Q-1 What are Income tax benefits of taking and repaying a housing loan under EMI Plan?
Ans:You will be eligible to claim both the interest and principal components of your repayment during the year.
• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)
• Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.
• You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.
Q-2 If I buy a house jointly with my wife and take a joint home loan, Can we both claim income tax deduction?
Ans:-Yes, if your wife is working and has a separate source of income, both of you can claim separate deductions in your income tax returns.The repayment of principal amount of the loan can be claimed as a deduction under section 80C up to a maximum amount of Rs.1 lakh individually by each co-owner.
In cases where the house is owned by more than one person and is also self-occupied by each co-owner, each co-owner shall be entitled to the deduction individually on account of interest on borrowed money up to a maximum amount of Rs. 1.5 lakh. If the house is given on rent, there is no restriction on this amount. Both co-owners can claim deductions in the ratio of ownership.
Q-3 My husband and I have jointly taken a home loan. He pays 75 percent of the EMI. What will be our individual tax benefits?
Ans: – As you have taken a joint home loan, both of you are eligible for tax exemption for your share of the EMI paid. For claiming income tax deduction, the EMI amount is divided into the principal and interest components. The repayment of the principal amount of loan is claimed as a deduction under section 80C of the Income Tax Act up to a maximum amount of Rs. 1lakh individually by each co-owner. The repayment of the interest portion of the EMI is also allowed as a deduction under section 24 of the Act, which is given under the head “income from house property”. In case you are living in the house for which home loan is taken, both of you shall be entitled to deduction in the ratio (3:1) on account of interest on borrowed money up to a maximum of Rs. 1.5 lakh individually. If the house is given on rent, there is no restriction on this amount and both co-owners can claim deduction in the ratio of ownership- 3:1 in your case.
Q- 4 plan to buy a house by raising loans from friends and relatives. Will I be eligible for tax benefit from all sources?
Ans: – No, you can not get the tax benefits on housing loan, u/s 24 and Sec 80 C. It is advisable to borrow the loan from any financial institution to avoid the confusion.
Q- 5 What are the tax benefits that I can avail of for repaying a home loan ?
Ans: – You will be eligible to claim both the interest and principal components of your repayment during the year.
• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)
• Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.
• You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.
Q- 6. Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA)?
Ans: – If you took a home loan and are still living in a rented place, you will be entitled to:
1. Tax benefit on principal repayment under Section 80C
2. Tax benefit on interest payment under Section 24
3. HRA benefit
Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.
Q- 7. I have a home loan in which I am a co-applicant. However, the total EMI amount is paid by me. What is the total income tax exemption that I can avail of?
Ans: – Yes, you can claim income tax exemption if you are a co applicant in a housing loan as long as you are also the owner or co owner of the property in question. If you are only person repaying the loan, you can claim the entire tax benefit for yourself (provided you are an owner or co-owner). You should enter into a simple agreement with the other borrowers stating that you will be repaying the entire loan. If you are paying part of the EMI, you will get tax benefits in the proportion to your share in the loan.
Q- 8. I have two housing loans on two different properties. Can I get tax rebate under sec 80 C of both the loans?
Ans: – Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled to will be a total of Rs 100,000 across both the homes.
The interest paid on a home loan is not directly deductible from your salary income for either of your flat loans. Income from house property will be calculated for each flat you own. If either of theses calculations shows a loss, this loss can be set off against your income from other heads.
As for Section 24 deduction, on your self occupied house you can take advantage of interest payments up to Rs.1,50,000. For the other property, you can claim actual interest repaid, there is no limit for the same.
Q- 9.I live in Delhi in my own house. In 2007, I took a housing loan to fund the purchase of an under-construction flat in another city (Faridabad which comes under National Capital Region of Delhi but otherwise falls in Haryana). It is expected to be completed in FY13. I haven’t claimed any tax benefit so far. What happens to the loan installments I have paid so far? Can they also be claimed for tax benefit?
Ans: – According to the Income-tax Act, 1961, where the property has been acquired or constructed with borrowed capital, the interest payable on such capital for the period prior to the year in which the property has been acquired shall be allowed as deduction in five equal installments beginning from the year in which the property is acquired. Thus, the interest included in the loan installment paid by you during the construction period shall be eligible for deduction from the year in which the flat is acquired/construction is completed.
The principal amount of the loan repaid till date shall not be available as a deduction under section 80C till the time the construction of the flat gets completed. Once the flat is completed and the possession is handed over to you, you will be eligible to claim deduction for interest paid on the loan under section 24(b) and principal amount of loan under section 80C. The total amount of deduction available under section 80C shall be limited to Rs. 1 lakh. Thus, as of now, you are not eligible for any tax benefit on such loan repayments.
In case of any query, please feel to revert back.
From India, Gurgaon
Dear Jagdish
It's a beautifully presented information.
However, I disagree with you on the last question. In Section 80C, there is no mention of completion of House Property for claiming deduction of Principal.
Section 24 mentions this requirement for claiming deduction of interest.
In my opinion, You can claim deduction u/s 80C irrespective of the completion stage of House property.
Rajiv
From India, Gurgaon
It's a beautifully presented information.
However, I disagree with you on the last question. In Section 80C, there is no mention of completion of House Property for claiming deduction of Principal.
Section 24 mentions this requirement for claiming deduction of interest.
In my opinion, You can claim deduction u/s 80C irrespective of the completion stage of House property.
Rajiv
From India, Gurgaon
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