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Deduction of Principal of Housing loan and Its Interest

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Deduction Of Principal of Housing loan and Its Interest Component. Tax Benefit on Housing Loan. Hi Friends Here we are discuss complete details for Deduction of Principal amount of Housing loan and Its Interest Component. In this article you can find complete details for Deduction of Principal of Housing loan and Its Interest like – Deduction under Section 80C (Only For Principal Loan Repayment), Complete details for Section 24 (Only for Interest Component), Summary For Section 24 and 80C etc. Now you can scroll down below and check complete details regarding “Deduction of Principal of Housing loan and Its Interest”

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Deduction of Principal of Housing loan and Its Interest

Housing Loan

Deduction under SEC-80C (Only For Principal Loan Repayment)

  • Principal repayment component of up to Rs. 1,50,000 (Rs. 2,00,000 for senior citizens) can be clubbed under the overall limit for tax saving instruments eligible under Section 80C.
  • Available only for purchase or construction of residential property
  • Deduction available only for self occupied property.
  • Deduction is available only when actual payment is done(i.e on cash basis and not on accrual basis, so the principal portion unpaid EMI and EMI’s accrued is not eligible for deduction
  • Tax Deduction claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by him.

Section 24 (Only for Interest Component)

  • Deduction is available on Accrual basis.
  • Deduction available if loan taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.
  • Annual Interest component of up to Rs. 2,00,000(Rs. 3,00,000 for senior citizens) can be claimed as deduction against income.(If completed within 3 years from the end of F.Y, If Not then deduction will be reduced to Rs 30,000)
  • No maximum Limit if Not a Self occupied Property.

Deduction under 80EE (Interest Component Only)

  • Additional tax deduction of Rs 1,00,000 is available to First time home buyers in respect of Interest on home loan.(This deduction will be over and above the deduction limit of Rs 2,00,000 allowed for self-occupied properties under section 24b of the Income Tax Act 1961.

Conditions:-

1) This is your 1st house purchased.

2) Value of this house is Rs 40 lakhs or less

3) Loan taken for this house is Rs 25lakhs or less

4) Loan has been sanctioned by a Financial Institution.

5) Loan has been sanctioned between 01.04.2013 to    31.03.2014

6) As on the date loan is sanctioned no other house is owned by the tax payer

7) Deduction available for F.Y 13-14 only (however if interest payable in F.Y 13-14 is less than 1,00,000, then the              balance amount can be claimed in F.Y 14-15).

  • As per the Finance Bill, 2013, Finance Minister announced that, “I propose to allow such home buyers an additional deduction of interest of Rs.100000/- to be claimed in A.Y.2014-15. If the limit is not exhausted, the balance may be claimed in A.Y.2015-16. This deduction will be over and above the deduction of Rs.2,00,000/-allowed under section 24 of the income tax Act.”   (Inserted on 1-4-2014)

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Summary Of Deductions for Interest Component

Particulars Self Occupied Property Non-Self Occupied Property
Section 24 Rs 2,00,000 No Limit
Section 80 EE Rs 1,00,000 Rs 1,00,000

Summary For Section 24 and 80C

Particulars Section 24 Section 80C
Tax Deduction Allowed Interest Principal Amount
Basis Of Tax Deduction Accrual Basis Paid basis
Quantum SOP=2,00,000

Non-SOP=No limit

Rs 1,50,000
Purpose Of Loan Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property. Purchase / Construction of a new House Property
Eligibility of Claiming Tax deduction Purchase/ Construction should be completed within 3 years N/A
Restriction on sale of property N/A Tax Deduction claimed would be reversed if Property sold within 5 years
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About Raju Choudhary

Article by Raju Choudhary Raju has written 537 articles. If you like This post, you can follow CAknowledge on Twitter. Subscribe to CAknowledge feed via RSS or EMAIL to receive instant updates.

One comment

  1. I booked a flat in a project in mid 2009. In April 2010, home loan EMI started. The project got delayed and it is complete now, August 2016. I havn’t taken the home loan benefits till date, neither on principal, nor interest. Please advice, how can I avail tax break on home loan. Also, is it good to close the loan account now, since I got some money to do it ? If I close the loan now, can I still get the home loan benefits, if any ?

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