Principal repayment of home loan
- The principal repayment component in the home loan EMI is allowed as deduction under Section 80C of the Income Tax Act.
- The maximum tax deduction allowed under Section 80C is 1.5 lakh, which includes investments in other instruments also.
- This deduction is allowed only after the construction is complete and completion certificate is awarded to the buyer.
- Payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C in year in which paid.
- In case the assesse transfers property on which he has claimed tax deduction under Sec 80C before 5 years, deduction claimed shall be deemed as income in year that the property was sold and taxed accordingly.
Tax benefit on home loan interest
- The interest component in the EMI can be claimed as deduction from “income from house and property“ under Section 24 of the Income Tax Act.
- The maximum tax deduction allowed under Section 24 is 2 lakh for self-occupied property and if the property is not self-occupied, there is no maximum limit.
- The interest payments for the year shall result in a loss under the head “income from house property“ which can be adjusted in the same year against other heads of income including salary.
- If the property is not completed within three years from when the loan was taken, then the interest benefit drops to 30,000.
- The pre-construction interest can be claimed from the year when the construction is complete in five equal installments.
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