Tax Benefit for Interest on Home Loan under Income Tax: Section 24

Home loan is very usual form of financing ones dream home. Buying own home was never an easy task until home loan came in to light. Income Tax department too wants citizen of India to buy their dream home, this can be concluded from the tax benefits of Interest on Home Loan as given under Income Tax Act.

Income Tax Act provides deduction for housing loan interest under section 24b. We will discuss with some examples on how to avail benefit of Interest on home loan in Income Tax.


Tax Benefit on Interest on Housing Loan. Section 24
Tax Benefit on Interest on Housing Loan : Section 24

Interest on which loans are eligible for deduction under Section 24?

Interest on Loan will be allowed as deduction, if:

Loan is taken for the following purpose:

  1. acquisition,

  2. construction,

  3. repairing,

  4. re-construction


Maximum allowable deduction for Interest on borrowed capital:


Loan is for Purchase/Construction of Self Occupied Property:

When property is purchased or constructed for the purpose of self utilization, than Interest on such loan will be allowable as deduction up to Rs.2,00,000/- (Rs.3,00,000/- for senior citizen as per Budget 2019-20)


Loan is for Purchase/Construction of Not Self Occupied Property (Let Out/Deemed Let out):

There is no maximum limit for Interest on loan on purchase/construction of a property which is let out or deemed let out.


Conditions for availing Deduction:
  1. Loan must be taken after 1st April 1999.

  2. Construction/Acquisition of such property shall be completed within 5 years from the end of the financial year in which loan was taken.

  3. Assessee should obtain Interest Certificate from a Lender.

Deduction will be reduced to Rs.30,000 from Rs.2,00,000/-, if:

  1. Loan was taken before 1st April 1999.

  2. Construction/Acquisition is not completed within 5 years from the end of the financial year in which loan was taken.

  3. Loan is taken for Renovation/Reconstruction of house property.



Points to be Considered:

  1. If owner of the property on which loan is borrowed is not residing in the property on which fund is borrowed due to his/her Occupation or Employment, then Interest on such loan will be allowable up to Rs.2,00,000/-.

  2. If loan is taken for reconstruction/ renovation of property then Interest on such loan will be allowed as deduction only after completion of Repairs/Renovation of the property, maximum allowable deduction of Interest on such loans will be Rs. 30,000/-.

  3. Interest expenses on housing loan during construction period is allowed as deduction in 5 equal Installments and can be claimed in the year in which construction is completed, pre construction interest is allowed only for construction of New Property and not for Repairs/Reconstruction. Such Pre construction Interest and Current Interest are altogether, subject to maximum limit as specified above.

  4. Any other expense on loan such as Processing Fees or Commission is not allowed as deduction.

  5. If loan is sanctioned in Joint Name for the Property which is jointly acquired, Interest on such loan will be allowed as deduction in proportion of ownership of property.

ABOUT AN AUTHOR:

Amish Maknojia is an enthusiastic entrepreneur and is keen to assist his clients with utmost simplified consultancy with organised and systematic approach. He is Master in Commerce and a CA Aspirant with a vision for himself as well as an ambition to assist the vision of the young entrepreneurs. He is a founder of idealconsultax.com with an experience of over 5 years and has achieved a great milestone.


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