INCOME TAX INCENTIVE FOR INVESTMENT IN HOUSING..

House construction has remained one of the main socio-economic objectives of Government.

An income tax assessee can avail two (2) types of tax incentives for housing 

i.e. deduction under Section. 80C in relation to repayment of principal component of house building advance (see Table) 

and in respect of interest on borrowed capital under Section 24 (b) for construction or /  purchasing of house property under the head income from house property.

Table presents the maximum amount of deduction.

MAXIMUM AMOUNT OF DEDUCTION IN RESPECT OF INTEREST ON BORROWED CAPITAL (Home Loan)

		Deduction from Net Annual Value
Let out house property (Rs.)		Self occupied house property (Rs.)
1996- 97 AY	No limit		10,000
1997- 98  AY	No limit		15,000
1999- 00  AY	No limit		30,000
2000- 01 AY	No limit		75,000
2001- 02 AY	No limit		1,00,000
From 2002- 03 to 2014-15 AY	No limit		1,50,000
From 2015-16	No limit		2,00,000

The above Table shows that there has been no maximum limit for interest on borrowed capital in case of let out house property during the study period and deduction limit in case of self-occupied house property had been continuously increased till A. Y. 2015 -16.

However, it has not been revised after that. It can be noted that prices of real estate and construction cost has increased at a very high rate since A.Y. 2015-16. It justifies a case for increase in deduction for interest on borrowed capital in case self-occupied house property. 

INCOME FROM HOUSE PROPERTY

In case of let out house property various deductions under Section 24 were available from net annual value viz. expenditure on repair and collection charges, insurance premium, annual charges, ground rent, interest on borrowed capital, land revenue, vacancy allowance and unrealized rent till A.Y. 2001-02.

It was quite complicated and difficult for the taxpayer to understand. With effect from A.Y. 2002-03, all the deductions except interest on borrowed capital have been substituted by standard deduction at the rate of 30% of net annual value.

This has been an appreciable step towards the simplification of taxation system. 

Repayment of house loan (principal component)

Deduction 80C Rs. 1,50,000 From AY 2015-16

 

Share: