Q & A ON HOUSE LOAN
Q-1 What are Income tax benefits
of taking and repaying a housing loan under EMI Plan?
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. 200,000 (Rs. 150000/- up to A.Y. 2014-15) 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. 150,000 (Rs. 100000/- up to A.Y. 2014-15) under Section 80C.
This is subject to the maximum level of Rs 150,000 (Rs. 100000/- up to
A.Y. 2014-15) 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. 1.50 (Rs. 1 Lakh up to A.Y. 2014-15) 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. 2 lakh (Rs. 1.50 Lakh
up to A.Y. 2014-15). 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. 1.50 (Rs. 1 Lakh up to A.Y. 2014-15) lakh
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. 2 lakh individually (Rs. 1.50 Lakh up to A.Y. 2014-15). 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: – Interest
payment to friends and relatives can be claimed u/s 24 but only against a
certificate received from them. In the absence of the certificate, you would
not be eligible for the deduction. The recipient of interest income who issues
the certificate is liable to pay tax on the interest income that he receives.
As far as the principal payments are concerned, they would not qualify for tax
benefit as loans only from notified institutions and banks are eligible for
such deductions.
Q- 5 What are the tax benefits
that I can avail of for repaying a home loan ?
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. 200,000
(Rs. 1.50 Lakh up to A.Y. 2014-15) 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. 150,000 (Rs. 1 Lakh up to A.Y.
2014-15) under Section 80C. This is subject to the maximum level of Rs 150,000
(Rs. 1 Lakh up to A.Y. 2014-15) 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) ?
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 ?
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?
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 150,000 (Rs. 1 Lakh up to A.Y. 2014-15) 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.2,00,000 (Rs. 1.50 Lakh up to A.Y. 2014-15). 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 2009, 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 FY 15.
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?
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 instalments beginning from the year in which the property is acquired.
Thus, the interest included in the loan instalment 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. 1.50 lakh (Rs. 1 Lakh up to A.Y.
2014-15). Thus, as of now, you are not eligible for any tax benefit on such
loan repayments.
Q. 10 Is there any additional deduction
which I can claim in respect of Interest on Housing loan in addition to
interest Under Section 24(b)?
Ans. Finance
Minister inserted a new section relating to the additional deduction in respect
of interest on loan taken for residential house property. Assessee can avail
the benefits of this section in two A.Y. 2014-15 & 2015-16.Purpose of this
section is to promote house ownership & give a fillip to a number of
industries like steel, cement, brick, wood etc. besides jobs to thousands of
construction workers. to get more information on the please read the
Full Article – Section 80EE
Income Tax Benefit on Home Loan Interest