Investors should know these Home Loan Rules
Apr 12, 2017 Home Loan
There are some questions like:
1.For an under-constructed house can a tax deduction be claimed?
2.If you have taken a loan from friends or family, can you still claim for a tax benefit?
A lot of investors are unaware of the rules regarding the same. We discuss them here.
1.Tax benefits for under- construction houses:
Generally, investors believe that they can claim tax benefit for their under constructed house without doing the necessary research. In fact, tax claiming for the under constructed house is different. Until you have the ownership certificate of the house, you cannot claim the tax benefit under Section 80C. But the interesting part is different. You cannot claim for the tax deduction for the interest of the under constructed house. However, once you get the ownership certificate, you can claim the deductions in 5 different instalments for the next 5 years.
2.If you sell the house before 5 years of construction, it reverses the saved tax:
We always want to save taxes. And after saving the tax for the particular year, the story does not end there. Tax benefit under section 80C considers the condition of the house and that it will not be sold before 5 years. However, if it is sold before 5 years from the date of purchase, all the taxes saved from the earlier years will be taken as your earning and will be taxable accordingly.
However, the housing loan interest deduction under section 24(b) remains as it is and will not be reversed.
3.If loan is taken from friends and family, it is eligible for deduction:
If you have taken a loan from your friends and family and not any financial institution, you can claim the interest up to Rs 1.5 lacs, on the loan under section 24. But you cannot claim for the deduction in the principal amount under section 80C. It is only eligible if you have taken the loan from any financial institution or bank.
4.Interest can be claimed if you have taken the loan for renovation:
If you have taken the loan to renovate or extend your property, then you cannot claim for deduction on the principle amount, under section 80C. However, you can claim the interest amount under section 24, but the limit is up to Rs 30,000 for the self-occupied properties.
For the properties which are let out or rented, there is not limit for the tax deduction.
1.For an under-constructed house can a tax deduction be claimed?
2.If you have taken a loan from friends or family, can you still claim for a tax benefit?
A lot of investors are unaware of the rules regarding the same. We discuss them here.
1.Tax benefits for under- construction houses:
Generally, investors believe that they can claim tax benefit for their under constructed house without doing the necessary research. In fact, tax claiming for the under constructed house is different. Until you have the ownership certificate of the house, you cannot claim the tax benefit under Section 80C. But the interesting part is different. You cannot claim for the tax deduction for the interest of the under constructed house. However, once you get the ownership certificate, you can claim the deductions in 5 different instalments for the next 5 years.
2.If you sell the house before 5 years of construction, it reverses the saved tax:
We always want to save taxes. And after saving the tax for the particular year, the story does not end there. Tax benefit under section 80C considers the condition of the house and that it will not be sold before 5 years. However, if it is sold before 5 years from the date of purchase, all the taxes saved from the earlier years will be taken as your earning and will be taxable accordingly.
However, the housing loan interest deduction under section 24(b) remains as it is and will not be reversed.
3.If loan is taken from friends and family, it is eligible for deduction:
If you have taken a loan from your friends and family and not any financial institution, you can claim the interest up to Rs 1.5 lacs, on the loan under section 24. But you cannot claim for the deduction in the principal amount under section 80C. It is only eligible if you have taken the loan from any financial institution or bank.
4.Interest can be claimed if you have taken the loan for renovation:
If you have taken the loan to renovate or extend your property, then you cannot claim for deduction on the principle amount, under section 80C. However, you can claim the interest amount under section 24, but the limit is up to Rs 30,000 for the self-occupied properties.
For the properties which are let out or rented, there is not limit for the tax deduction.
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