A home loan facility provides many tax benefits to the individual assessee under the Income Tax Act, 1961 (“the act”). They can avail deduction for principal and interest components of a loan. Interest payable on capital borrowed for acquisition, construction or renovation of house property is eligible for deduction u/s 24(b) of the act.

Tax relief for the payment made towards principal repayment of borrowed amount from recognized bank or financial institution for construction or purchase of house is allowed under 80C. The following payment made towards the cost of purchase/construction of a new residential house property is qualified for the purpose of section 80C:

I – Repayment of the amount borrowed from :
i. the Central Government or any State Government, or
ii. any bank including a co0operative bank, or
iii. the Life insurance corporation of India, or
iv. the national housing bank, or
v. any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction u/s 36(1)(vii), or
vi. any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
vii. the assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or
viii. the assessee’s employer where such employer is a public company or public sector company, or a university established by law or a college affiliated to such university or local authority or co-operative society;

II – Any installment or part of payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him (it is not applicable if the assessee is not a shareholder or member of the company/co-operative which provides house to the assessee); or

III – Any installment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

Further, many of us are not aware of the fact that even cost incurred for payment of Stamp duty, registration fee or other expenses for the purpose of transfer of such house property to the assessee paid directly by the assessee can also be claimed under 80C.

Further, there are specific items which are not allowed as exemption under section 80C of the Act, and the assessee need to check these before claiming deductions.

Please feel free to CONTACT US if you have any query on tax benefits and other items relating to housing loan.

Taxmantra has the expertise in handling individual taxation. Taxmantra also provides comprehensive tax planning and Tax support in addition to filing of return of income.