EMIs (elementary month by month installmets) consists of two parts – a persons vision portion and principal amount. Interest paid is allowed as a tax benefit under section 24(b) (be subject to restrictions), as the principle amount repaid is allowed like a deduction under section 80C.
Maximum tax deduction for repayment principal part of 二胎 can’t exceed Rs 1,00,000 under section 80C. One should take into account that other investments/contributions can also be allowed as a deduction under section 80C, and this limit of Rs. 1,00,000 applies to all of them come up with.
Housing loan interest deduction, however, is allowed up to a maximum amount of Rs 1,50,000 under section 24(b). However, purchasing or construction of the house property must be completed within several years from the end of financial year in which loan was taken; otherwise, the quantity of interest benefit allowed is only up to Rs 30,000.
Furthermore, these tax deduction limit u/s 24(b) can be applied only for self-occupied house property. In case of let-out or deemed being let out house property, interest is deductible without the limit.
Some claim that deduction on principal element of home loan under section 80C is allowed the moment one starts repaying the house loan. Some say deduction is allowed only once the construction is done. The law isn’t sure the matter; hence the ambiguity remains.
Interest deduction on housing loans under section 24(b) is allowed only on acquisition or completion of the home property. However, interest deduction for pre-acquisition or pre-construction period is additionally allowed but only after acquisition or construction is complete. It is allowed in 5 equal annual installments. But even after including these, the complete deduction shouldn’t exceed Rs. 1,50,000 per annum.
Unlike section 24(b), Section 80C doesn’t allow tax deduction for home mortgages taken from friends. For claiming tax benefit on principal element of the home loan under section 80C, you should borrow only from the lenders specified by that section. There is no such restriction under section 24(b) with the IT Act for claiming tax benefit on interest component of the housing loan.
Home improvement Deduction under section 80C for principal portion with the housing loan EMI is just not allowed if the house loan borrowing is good for the purpose of reconstruction, renewal or repair of house property. Put simply, tax benefit under section 80C is merely allowed for purchasing or constructing a brand new home. In contrast, deduction for Interest is allowed under section 24(b) even for the borrowed funds taken for the intention of repair, renewal or reconstruction of existing house property but at the mercy of the limit of Rs 30,000 in case there is self-occupied house property. In case of discrete house property, actual interest is allowed without ceiling.
Tax benefit u/s 80C can be claimed only when the actual payment is made. Interest deduction u/s 24(b), on the other hand, is allowed on accrual or due basis. Put simply, unlike principal portion, interest deduction can be claimed even if not paid.
The tax benefit under section 80C is allowed subject to the condition the said house property should not be sold before a period of 5 years. If you violate this, the deduction will be discontinued and also the entire tax deduction claimed in earlier years under section 80C – for repayment of principal component of the house loan – will probably be deemed being your income in the year in which you sell the exact property. However, exactly the same doesn’t apply for the housing loan interest deduction claimed under section 24(b).
Tax benefit on interest element of the home loans u/s 24(b) is allowed not limited to original house loan but also for subsequent loan(s) taken up refinance the 1st loan. In short, when the new housing loan is taken up pay off an existing housing loan, tax benefit under section 24(b) is allowed. However, devspky87 section 24(b), there is no specific mention under section 80C for prepayment of existing mortgage by taking a fresh home loan.
So what it means is that when you repay the total amount outstanding principal component of your existing 房屋二胎 by taking a second house loan, you will be entitled for tax deduction under section 80C but within the overall limit of Rs one lakh. Further, once you subsequently start repaying not your your first housing loan, you will be entitled for tax benefit only on the eye portion u/s 24(b) and not around the repayment of principal component u/s 80C.