What tax benefits, deductions are available on home loans for new buyers?
You can claim a deduction in respect of repayment of the principal portion of the housing loan subject to an overall cap.
I am planning to buy my first house in November 2015, what are the various tax benefits and deductions available on home loans? - Suresh Raghavan, Chennai
Congratulations on the purchase. Under Section 80C of the Income Tax Act 1961, you can claim a deduction in respect of repayment of the principal portion of the housing loan subject to an overall cap of Rs 1.5 lakh, irrespective of whether the property is rented or self-occupied.
If the home loan is availed against an under-construction property, the tax benefit with respect to the interest can be claimed only once the construction of the property is completed. The interest paid for the period prior to the financial year in which the construction of the property is completed is allowed as deduction in five equal annual instalments commencing from the financial year in which the construction of the property is completed.
Over and above this sum, you can claim deductions towards the interest on housing loan under Section 24. However, this deduction would depend upon whether the property is considered as self-occupied property (SOP) or actually let out.
In case of SOP, the quantum of deduction towards interest on housing loan is restricted to Rs 1.5 lakh in a financial year. If the property is actually rented out, the entire interest can be claimed as deduction against the net rental value computed as per the specified provisions.
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