Are you a 1st time home buyer and planning to buy your house in FY 2016-17? Go ahead, you have an opportunity to claim an additional income tax rebate of up to Rs. 50,000.00 on home loan interest payments under section 80EE. There are certain conditions for the same:
- The home loan should have been sanctioned in FY 2016-17
- Loan amount should be less than Rs 35 Lakh
- The value of house should not be more than Rs 50 Lakh
Apart from this, you can also, get tax benefit under Income Tax Act Section 80C and Section 24. Since there are two components of Home Loan repayment, therefore, your get tax benefit under two different section of Income Tax Act. Lets see what are the two components of Home Loan.
- Repayment of Principal amount of the loan; and
- Repayment of Interest amount of the loan.
You get a tax benefit under section 80C for the repayment of Principal amount of your Home Loan. And, you get a rebate for interest repayment of your home loan under section 24.
Income Tax Rebate on Principal Amount of Home Loan under Section 80C of Income Tax Act:
If you are an individual/HUF, and you are repaying the principal amount of your Home Loan; then you are eligible for tax rebate under section 80C of Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs. 1,50,000. This tax deduction is the total of the deduction allowed under Section 80C including your money invested in PPF Account, National Saving Certificates, Tax Saving Fixed Deposits, Mutual Funds, Senior Citizen Saving Schemes, etc. Also, the tax rebate under Section 80C is available on payment basis irrespective of the year for which the payment has been made. Especially relevant, even, if you have not taken home loan, but paid Stamp Duty and Registration Fee for your house, you are still eligible for the tax benefit under section 80C.
Clause of tax benefit for under construction property under section 80C:
However, if your house in under construction, then you will not get a benefit of tax under section 80C for those years during which your house as under construction. Irrespective of the fact that you are repaying the principal amount of your home loan. Once your house gets constructed completely, you will have to get a completion certificate from the builder; and then you can start claiming income tax rebate on your home loan under section 80C for the principal repayment.
Furthermore, you will have to pay service tax if your property is under construction. So, before you plan to buy a home, think about all aspects.
Clause of tax benefit for transferring property under section 80C:
If you are planning to transfer your house on which you have claimed income tax rebate under section 80C before 5 years from the possession of the property, in such cases, you are not allowed for tax rebate under section 80C on repayment of principal amount of your home loan. The total amount of tax rebate which you may have already claimed in respect of previous years, will be considered as your income of such year in which the property has been sold; and you will be liable to pay tax on such income.
Income Tax Rebate on Interest Amount of Home Loan under Section 24 of Income Tax Act:
You are eligible for a tax rebate on repayment of interest under section 24 of Income Tax. The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs.2.00 Lakhs. However, in case, your property is not self-occupied, then there is no maximum limit prescribed; and, you can take tax rebate on complete interest amount under section 24. Especially relevant is that the tax rebate on interest of home loan under section 24 is deductible on accrual basis. Therefore, even if you have made no payment during the year, you still can claim a tax benefit under Section 24 on yearly basis.