Published on 1/22/2017 3:43:17 PM
Have you claimed all these tax deductions?
This is the last quarter of this financial year. You need to ensure you claim all eligible tax deductions available on your home loan to make it most cost-efficient.
The last quarter of the current financial year has already begun. It is time to start planning for your taxes, in case it has not been done already. You still have time to plan and use the tax exemptions provided in the Income Tax Act.
With reference to 'Income from House Property' and housing, there are a few tax benefits that were provided in the last Union Budget. You should try to claim these additional benefits.
Normally, a home loan borrower paying interest on the loan can claim a deduction against the interest paid from his gross total income up to a maximum of Rs 2 lakhs per annum under Section 24 for self-occupied properties. There is no limit in case the property is rented out. The Budget had provided for an extra deduction on a home loan taken by first-time homebuyers.
A first-time homebuyer availing a home loan in 2016-17 is allowed an additional tax benefit of up to Rs 50,000 under Section 80EE of the Income Tax Act. The Finance Act 2016 had introduced a deduction against interest payable on a housing loan for a first-time homebuyer when the loan is taken from any financial institution over and above the deduction allowed under Section 24. This deduction is allowed only to individuals.
The deduction is available from the financial year 2016-17 onwards. The deduction is allowed till the loan is repaid. It is available on the purchase of a residential property only.
As there is no limit on interest deduction under Section 24B for a rented property, this Section benefits only those who have taken loan to buy a property to live in. Further, the deduction under this Section is allowed only if certain conditions are met. They are:
- The loan should have been sanctioned by a financial institution between April 1, 2016 and March 31, 2017.
- The amount of loan sanctioned, for the acquisition of a residential property, should not have exceeded Rs 35 lakhs. The value of the residential property bought should not have exceeded Rs 50 lakhs.
- You should not have been the owner of any other residential property on the date of sanction of the loan.
- The deduction is available only for first-time home buyers. The maximum additional benefit is capped at Rs 50,000 per annum. This deduction is allowed over and above the deduction under Section 24B.
Another significant amendment introduced in the last Budget, and to be kept in mind, is the extension in the time limit to claim the deduction against interest paid. In case of a home loan, the interest payable up to Rs 2 lakhs can be deducted from your gross total income while computing income from a self-occupied house.
This was only in case where the acquisition or construction of the house was completed within three years from the end of the financial year in which the loan was taken. This time limit has been relaxed. This tax benefit is available if the acquisition or construction was completed within five years from the end of the financial year in which the capital was borrowed.
So, all those acquiring possession of the house within five years of taking the loan will now be eligible for the interest deduction. This will benefit a homebuyer if the project has been delayed.
It is also important to note that this tax deduction against interest on a home loan under Section 24 is deductible on an accrual basis. Hence, the deduction under Section 24 should be claimed on a yearly basis even if no payment has been made during the year.