The benefits that income tax authorities provide, as a result of servicing a housing loan from specified financial institutions, is documented over several sources. The following provides for some direction:
This section deals with deduction available on Interest paid on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of property. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.
This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.
So, should you borrow money to purchase or construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh on interest paid. The criteria being: the property has to be acquired or constructed within 3 years from the end of financial year in which the capital was borrowed and be self - occupied. When put in figures, this is quite an amount:
A deduction u/s 80C (2) (xviii) is available on repayment of principal during a financial year up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs 1 lakh specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is from Gross Total Income.
Every bank issues an income tax certificate that serves as requisite proof to let you avail of tax benefits that accrue on repayment of a home loan. This will typically contain the total amount of interest and capital repaid during the Year. This is mandatory to claim the tax benefit in respect of self-occupied property. You will have to file this with your tax returns and submit this to your employer or chartered accountant to calculate your tax liability.
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