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I am Bangalore-based and reside in my own house,which I had constructed about 20 years back by availing housing loan from a bank. I have closed this loan about 4 years back. During FY 2007-08,I booked another flat in Bangalore by availing housing loan. The loan has been disbursed by them commencing from June 2007 (FY 2007-08) and finally property was registered in my name during February 2009 (FY 2008-09). I took the possession of the property in March 2009. Now I plan to rent it out. I wish to know if I can get the entire amount of interest of Rs.1.70 lakh for deduction as Tax Benefit under Sec 24(B) of IT Act? The flat could not be rented out during FY 2008-09. Thus there was no rental income from the flat during that financial year. What would be the situation of the deduction on account of interest payment?
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Since you already own a house which is self-occupied,the second house will be deemed to be let out,even if it is not so actually let out. The fair rental value,or the amount which a similar property in the same locality is expected to fetch,will be considered as your income from that property for the year. However,since you have acquired the property only in February 2009,the notional rent will be considered only for the period for which you have held the property. As such,the interest paid on the home loan will be allowed as deduction as per the actual amount so paid.
I am getting my house constructed. I have obtained a loan of Rs 25 lakh for the construction from my bank,out of which Rs 18 lakhs has been disbursed in installments. I had plans to get the ground floor and the first floor constructed. However,with my son getting a new employment and deciding to settle abroad,I have shelved the plans to get the first floor fully constructed as of now. Now,with another Rs 2 lakh,the construction would be complete. I am planning to request the bank to stop the disbursal after this instalment and start the EMI. I wish to know how that would affect my income tax benefit on the home loan as I have not taken the full disbursement. I am already paying interest on the amount disbursed to me till date. Can I claim any tax benefit on the amount that I have not received as disbursement?
The tax benefit on the home loan repayment is available only on its repayment. Since you have not availed part of the loan in question,it would not amount to repaying it. As such,you would not be entitled to any tax benefit on account of that portion of the loan.
As for the interest that you are paying on the disbursed amount of the home loan (called the pre-EMI interest as the EMI is yet to start),it would not be allowed as deduction before the financial year in which the construction is complete. Assuming that the construction is completed in the financial year 2009-10,the interest so paid till the financial year 2008-09 shall be aggregated and allowed as deduction in five equal annual installment beginning the financial year 2009-10,the year in which the construction is completed. There is,however,no such restriction on the principal repayment. Do note that the aggregate of this portion of the interest and the annual interest for the relevant financial year cannot exceed the limit prescribed in section 24 of the Income tax Act.
As it is,you will have to obtain a repayment certificate from your lender stating the total interest and principal repayment during the relevant financial year,without which you would not be able to claim the tax benefit. Though this certificate would not be submitted with your income tax return,you will have to retain it,should it be called for at a later date.
I had taken a house loan of Rs 20 lakh from a private bank. The house was supposed to be handed over to me by the end of 2008,but due to some unavoidable circumstances,it has now been delayed. Now I am likely to get the possession by Oct 2009. The bank has started deducting EMI with effect from December 2008. Please let me know whether I am entitled to any tax benefit for financial year 2006-2007 for the interest and principal amount paid in FY 2008-2009? If not,can it be carried over to next financial year 2009-2010?
The tax benefits relating to the interest payment of the home loan are contingent upon the existence of the house property to which the home loan relates. Since you are yet to have a house property (irrespective of the fact that it is complete or not,you do not have its possession/ownership),you are not entitled to the deduction on account of interest paid. However,the interest component of the EMI that you are now paying,shall be added up and allowed as deduction in five equal annual installments beginning the financial year in which you own the house.
As for the principal component of the EMI,there is no such restriction. As such,you may claim the deduction under section 80C for the year in which it is so paid. l
The author is a chartered accountant.
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