Deduction of Principal of Housing loan and Its Interest

Deduction Of Principal of Housing loan and Its Interest Component. Tax Benefit on Housing Loan. In this article you can find complete details for Deduction of Principal of Housing loan and Its Interest like – Deduction under Section 80C (Only For Principal Loan Repayment), Complete details for Section 24 (Only for Interest Component), Summary For Section 24 and 80C etc. Now you can scroll down below and check complete details regarding “Deduction of Principal of Housing loan and Its Interest”

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Deduction of Principal of Housing loan and Its Interest

Deduction under SEC-80C (Only For Principal Loan Repayment)

• Principal repayment component of up to Rs. 1,50,000 can be clubbed under the overall limit for tax saving instruments eligible under Section 80C.
• Available only for purchase or construction of residential property
• Deduction available only for self occupied property.
• Deduction is available only when actual payment is done(i.e on cash basis and not on accrual basis), so the principal portion unpaid EMI and EMI’s accrued is not eligible for deduction
• Tax Deduction claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by him.

Section 24 (Only for Interest Component)

• Deduction is available on Accrual basis.
• Deduction available if loan taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.
• Annual Interest component of up to Rs. 2,00,000(Rs. 3,00,000 for senior citizens) can be claimed as deduction against income.(If completed within 3 years from the end of F.Y, If Not then deduction will be reduced to Rs 30,000)
• No maximum Limit if Not a Self occupied Property.

Deduction under 80EE (Interest Component Only)

• Additional tax deduction of Rs 50,000/- is available to First time home buyers in respect of Interest on home loan.(This deduction will be over and above the deduction limit of Rs 2,00,000 allowed for self-occupied properties under section 24b of the Income Tax Act 1961.)

Conditions:-

• 1) This is your 1st house purchased.
• 2) Value of this house is Rs 40 lakhs or less.
• 3) Loan taken for this house is Rs 25 lakhs or less.
• 4) Loan has been sanctioned by a Financial Institution.

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Summary Of Deductions for Interest Component

Particulars	Self Occupied Property	Non-Self Occupied Property
Section 24	Rs 2,00,000	No Limit
Section 80 EE	Rs 1,00,000	Rs 1,00,000

Summary For Section 24 and 80C

Particulars	Section 24	Section 80C
Tax Deduction Allowed	Interest	Principal Amount
Basis Of Tax Deduction	Accrual Basis	Paid basis
Quantum	SOP=2,00,000 Non-SOP=No limit	Rs 1,50,000
Purpose Of Loan	Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.	Purchase / Construction of a new House Property
Eligibility of Claiming Tax deduction	Purchase/ Construction should be completed within 3 years	N/A
Restriction on sale of property	N/A	Tax Deduction claimed would be reversed if Property sold within 5 years