Many persons has confusion on this topic "How much deduction of interest on house loan taken for house construction /purchase /Repair is allowed under Income Tax . So we have simplified the provisions and prepared a chart to under stand the thing in easy way.
Interest on borrowed capital for Let out property
There is no limit specified for house loan interest taken on property ,given on rent. Means you can deduct interest without any limit.
Interest on borrowed capital for self occupied property
The maximum amount of interest permissible in cases of self-occupied property is Rs.1,50,000 (in respect of funds borrowed on or after 01.04.1999). Interest upto Rs.1,50,000 is deductible if the following conditions are satisfied:
- Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property;
- the acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed; and the person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principal amount outstanding under an earlier loan taken for such acquisition or construction.
In the above context the following further aspects have to be kept in view:
- If capital is borrowed for any other purpose (e.g. if capital is borrowed for reconstruction, repairs or renewals of a house property), then the maximum deduction on account of interest is Rs.30,000 (and not Rs.1,50,000).
- There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential unit could have commenced before April 1,1999 but, as long as its construction/ acquisition is completed within 3 years, the higher deduction of Rs.1,50,000 would be available. Also, there is no stipulation regarding the construction/acquisition of the residential unit being entirely financed by the loan taken on or after April 1, 1999. It may be so in part.However, the higher deduction upto Rs.1,50,000 can be taken for the loan which has been taken and utilized for construction/acquisition after April 1, 1999. The loan taken prior to April 1, 1999 will carry deduction of interest upto Rs. 30,000 only (CBDT’s circular No. 779,dated September 14, 1999).
Rs. 1,50,000 maximum deduction will not be available in the following situations:
- if capital is borrowed before April 1, 1999 for purchase,construction, reconstruction, repairs or renewals of a house property;
- if capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
- if capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed. In the above situations only deduction upto Rs. 30,000 can be claimed.
- Interest On house Loan and Income tax
- Interest on Pre-Construction period on house loan -calculation and deduction available in income tax.
- Interest In case of Self occupied House-Limit 150000/30000
- House Loan Repayment and Savings under section 80C
- House Loan and HRA both benefit available.
- House property income and House Loan
Section 24(b) reproduced hereunder for your ready reference
24(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:
Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :
Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed 24[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.
Explanation.Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]
Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.
Explanation.For the purposes of this proviso, the expression new loan means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.