sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
News Headlines »
 All you need to know about gift tax this wedding season
 3rd instalment of advance tax due on 15 December
 Tax on your gold and real estate investments
 Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2018
 Have you filed your income tax? Remember these deadline nears; know from TDS, TCS to challan, forms
 Notification No. 96/2018 -Central Board Of Indirect Taxes And Customs
 Here’s how you can check your ITR refund status online
 Your tax form will be filled by the taxman Income tax return (ITR) filing
  Section 24 and Section 56 of the Banking Regulation Act, 1949 - Maintenance of Statutory Liquidity Ratio (SLR)
  Companies (cost records and audit) Amendment Rules, 2018
 Income tax, TDS rules explained in 10 points EPF withdrawal

Govt wants you to own a house- See income tax benefits extended
May, 23rd 2016

The government wants you to own a house and the same becomes evident from the various tax benefits allowed under the income tax laws to the persons who own a house. Let us understand the various beneficial tax provisions which prove that the government wants you to own a house.

Tax benefits for repayment of home loan: As per Section 80C of the Income Tax Act, 1961, an individual and a Hindu Undivided Family are entitled to claim deduction up to Rs. 1.50 lacs in respect of principal repayment of the home loan, taken for the purchase or construction of a residential house. The loan should have been taken from specified institutions, like bank, housing finance company, central government, state government, local authority or even a public limited company which is your employer.

For claiming these benefits the house should be complete and possession should have been taken by you. So in for an under construction house at the end of the year, you cannot claim this benefit.

The government wants you to continue to own the house and not to speculate on it. This is evident from the provision which requires you to retain the house and not to sell it before completion of five years from the end of the year in which possession of the house is taken. In case you sell, the house before completion of five years no tax benefits shall be available for the year in which you sell the house. Moreover all the tax benefits claimed earlier by you on such house shall be reversed in the year in which you sell the house and shall be treated as income of the year. There is no such reversal provision in case you prepay the home loan even before completion of five years. So the government does not mind you prepaying the home loan but does not want you to trade in the house.

Tax benefits for payment of the amount owed towards cost of the house: Section 80 C also allows you deduction within the overall limit of Rs. 1.50 lakh in respect of payment of instalment or part payment of the amount due to any company or cooperative society where you are a shareholder or a member for amount outstanding in respect to cost of the house allotted to you by such company or cooperative society. Deduction is also available for payment of amounts due to any housing board, or any development authority towards purchase consideration for such house purchased under any scheme of these authorities for construction or purchase of a house.

Tax benefits for payment of stamp duty etc: It is not only the principal repayment of the loan which is allowed under section 80C, even any amount paid by you towards stamp duty, registration charges or transfer charges are also eligible for the tax benefits. The deduction in respect of these amounts is available only if the possession of the house is taken during the year. So even if you take possession of the house on 31st March of the year, you can claim the tax befits under Section 80C for home loan repayment, cost payment as well as stamp duty and registration charges.

Tax Benefits for interest payment in respect of completed house: Under Section 24(b) of the income tax act, you are allowed deductions for interest paid on money borrowed for purchase, construction or even repair, renovation of the house. This deduction is available from the year in which the constriction of the house is completed and possession taken in case of an under construction property. The quantum of deduction will depend on whether the house is self occupied or let out. In case of let out property full interest is allowed to be deducted. However in case of self occupied house property the amount of deduction shall be restricted to Rs. 2 lakh generally.

However in case of an under construction house if the construction is not completed within a period of three years from the end of the year in which the amount of the loan was disbursed, the quantum of deduction shall stand restricted to Rs. 30,000/- in a year. Looking at the usual delay in completion of the construction of the house in the country and in order to give relief to the tax payers the government, in the budget of 2016, has proposed to extend the period of completion of the construction of the house from three years to five year.

For claiming interest deduction it is not necessary that the loan has to be taken from specified institutions as is required for claiming deduction for loan repayment. Even interest paid to friends and relatives also qualify for this deduction as long as you are able to establish the linkage between the money borrowed and its end usage for the house purposes.

Since the deduction is available from the year in which the construction of the house is completed and possession is taken, a question may arise as to what happens to the interest paid before completion of the construction. The law has provided for it. You can claim such interest, which is generally referred to as Pre EMI interest, in five equal instalments from the year in which construction of the house is completed. The overall deduction is restricted to Rs. 2 lakh in case the house property is self occupied. Here also the law requires you to continue to own the house for at least for five years failing which the claim for Pre EMI interest not claimed shall lapse for the remaining years.

Latest proposal in the budget for affordable housing: The finance minister has proposed to allow a deduction of Rs. 50,000 in respect of interest on loan taken to buy an affordable residential house. Section 80EE which is being substituted proposes an additional deduction for interest of Rs. 50,000 in respect of loan of an amount not over Rs. 35 lakh for a house costing not more than Rs 50 lakh. This deduction is available only for the loans taken from financial institution or housing finance company. The benefit is available only to the people who do not own any house on the date of sanction of the home loan. This also goes to prove that the government wants each and every one to own a roof over his head. It is interesting to note that completion of construction is not a precondition for claiming this deduction.

Capital Gains Exemption: Section 54 and 54F of the Income Tax Act, provide for exemption for long term capital gains if a house is purchased or constructed within specified period. In case the capital gains arise from a residential house held for more than three years, you are required to invest only the capital gains computed after taking into account the indexation benefits. In case the long term capital gains arise on sale of any asset other than a residential house property, you are required to invest the net sale consideration for purchase of a residential house property provided you do not own more than one residential house on the date of sale of such other asset.

From the above discussion it becomes amply clear that the government wants you to own a house and continue to own it and therefore it has provided many benefits under the income tax laws. There are other benefits under the banking and indirect tax area which also point towards government’s eagerness to ensure that every citizen has a roof over its head. This I intend to cover in my next article.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Services SEO LLC e-boost Search Engine Optimization Services Internet Marketing Services Website Placement Services On-site Webs

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions