Income Tax Benefits on Housing Loan
We all know that Housing has always been in the focus area of Government for quite some time. That is why, it has provided various tax incentives/ rebate/ deductions for owning a house from time to time, right from allowing deduction of interest and principal repayment on housing loan to providing subsidy on housing loans under the ambitious scheme Pradhan Mantri Awas Yojna subject to fulfillment of certain conditions. By providing such incentives, Government has dual motive, one to promote more and more people to own house and on the other hand banks and financial institutions to provide easy credit to such proposed customers intending to own the house. This will ensure growth in the infrastructure & financial sector indirectly.
In case, you have availed a housing loan to own a house then you can avail following benefits while filing the Income Tax Return (ITR) and reduce your tax liability.
1. Income from house property will be reduced by interest amount due on housing loans during the relevant financial year availed subject to maximum of Rs. 2.00 lacs.
2. Principle amount for repayment of housing loan during the relevant financial year under section 80C subject to maximum of Rs 1.50 lacs clubbed with other tax saving instruments e.g. LIC premium, NSC, School fee payment, ELSS etc.
3. Additional interest rebate of Rs. 0.50 lacs and Rs. 1.50 lacs under section 80EE and 80EEA subject to fulfillment of conditions as mentioned below.
To summarize, the benefits under various sections are tabled below:
Self- Occupied Property:
Let Out / Deemed Let out Property
As per income tax, in case any person owns more than one property, he can declare two properties as self- occupied and remaining properties if any as let out / deemed let out. In addition to above, the benefits related to rented / deemed let out property is as below:
Tax Planning
Now, I am going to discuss about various points which may be useful for tax planning under the head of Income from House Property.
1. Always prefer taking housing loan over using own resource to own a property, as Housing loans are the cheapest form of finance available for long term.
2. In case both husband and wife are earning members it is advisable to own the property jointly and also avail the loan jointly so that the benefit can be availed by both subject to total limit as mentioned above.
3. In case of rented property, it is advisable to let out the property net of maintenance charges as there is no allowance for deduction of the same. Therefore, the lessee should pay the maintenance charges directly to the society and lessor should get the rent net of maintenance charges which will reduce the rental income and tax liability on the same.
4. The amount of interest allowed to be claimed as deduction, is on due basis and not on paid basis. Therefore, even if the interest has not been paid, the same can be claimed.
5. The mentioned provisions are available under the Old Regime of Income Tax, for New Regime, the deduction of interest is not available for self- occupied property. However, the deduction will be available against let out property. In case the interest amount is higher than the rentals such and results into loss, such loss can be claimed against income from other House Property but, not against any other source of income.