Feb 22, 2010
As the financial year comes to an end, it is time to
start planning your tax saving strategies.
to a certain extent. Under Section 24 of the Income
Tax Act, interest paid up to Rs 1.5 lakhs per annum
on a home loan can be set-off from salary or businessincome, for a self-occupied property.
Loan for construction eligible for deduction
A loan availed for the construction of a residential property,
purchase of a residential property, extension of an existing house,
and major repairs and renovation of a house are eligible for tax benefits.
Under Section 88 of theIncome Tax Act , a home loan borrower can
claim a deduction of up to Rs 1 lakh from his taxable income
on repayment during the year along with specified savings
instruments like provident fund.
All co-owners eligible for deduction
In case there are co-owners to a property, each of them can
claim tax benefits separately , in proportion to their share
holding in the property. If the share holding is not mentionedin the purchase deed, they can execute an agreement on a
stamp paper, mentioning the shares in the property,
and claim tax benefits separately .
Co-owners can thus claim a deduction of up to Rs 1.5 lakhs
per annum separately, on interest paid towards a self-occupied house,
and also up to Rs 1 lakh per annum towards principal amount repaid.
Pre-EMI qualifies for benefit
The entire pre-EMI interest amount (the interest paid
during the construction period ) is allowed as a deduction
under Section 24 of the Income Tax Act equally over five years(20 percent of total interest paid per annum), starting from the
year in which the construction is completed.
However, if one avails a loan only for a land purchase,
he is not eligible for any tax benefits. In the case of a
composite loan (for land and construction ) and the house
construction is completed within three years, only after
completion ofthe construction will one be eligible for the
tax benefits.
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