If
the property is self-occupied, then deduction on interest shall be restricted
to Rs.1.5 lakh per Financial Year (FY)
Reply
by Ms. Parizad Sirwalla, CA
 |
| Parizad Sirwalla |
How
can I claim tax benefit on my housing loan?
—
Mr. Kiran Bhattacharya
With
respect to the residential property for which the possession has been taken,
the quantum of deduction towards interest on housing loan depends on whether
the residential property against which the home loan is availed is a
self-occupied property (SOP) or let-out property (LOP) or deemed to be let- out
property (DLOP).
If
the property is an SOP, then the deduction towards interest shall be restricted
to Rs.1.5 lakh per (FY) . Whereas, if the property is treated as LOP / DLOP,
then the entire interest on housing loan can be claimed as deduction against
the net rental value / deemed rental value.
Additionally,
you can claim deduction towards repayment of the principal portion of the
housing loan borrowed from specified lenders subject to an overall cap of Rs.1
lakh under section 80C of the Income - tax Act, irrespective of whether the
property is SOP, LOP or DLOP.
With
respect to under-construction property, you can claim tax benefit in respect of
interest on the housing loan availed only once the construction of the property
is completed. The interest paid for the period prior to the FY in which the
construction of the property is completed shall be deductible in five equal
annual instalments commencing from the FY in which the construction of the
property has been completed.
Accordingly,
the deduction towards aggregate interest (including one-fifth of
pre-construction interest) could be claimed from the FY in which the
construction of the property is completed.
With
respect to tax deduction on the principal portion of home loan, while there is
an ambiguity on whether the property should be constructed to claim the same
under section 80C, it may be possible to claim it when the property is
under-construction.
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