FAQ on Housing Loan and Income Tax Benefit:
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.
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 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. 1.5 lakh. 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. 1lakh 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. 1.5 lakh
individually. 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.
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:
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 100,000 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.1,50,000. 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 2007, 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 FY13. I haven’t claimed any tax benefit so far.
What happens to the loan instalments 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 lakh. Thus,
as of now, you are not eligible for any tax benefit on such loan repayments.
_________________________________
Things you must Know about tax benefits on home loan
1.
Home loan borrowers are entitled to tax benefits under Section 80C and Section
24 of the Income Tax Act. These can be claimed by the property’s owner.
2.
In the case of co-owners, all are entitled to tax benefits provided they are
co-borrowers for the home loan too. The limit applies to each co-owner.
3.
A co-owner, who is not a co-borrower, is not entitled to tax benefits.
Similarly, a co-borrower, who is not a co-owner, cannot claim benefits.
4.
Housing companies usually require all co-owners to be joint borrowers to a home
loan. Loan providers specify who can be a joint borrower for a home loan.
5.
The tax benefit is shared by each joint owner in proportion to his share in the
home loan. It’s important to establish the share for each co-borrower to claim
tax benefits.
6.
The certificate issued by the housing loan company, showing the split between
principal and interest for the EMIs paid, is required for claiming tax benefits
source:taxguru
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