Continuing our discussion further in relation to our previous related postsÂ on FAQs on House Property.
1)Â Â Â Â Â I am planning to buy a house by raising loans from friends and relatives. Will I be eligible for tax benefit from all sources?
Ans: Interest payment to friends and relatives can be claimed u/s 24 but only against a certificate received from them. In the absence of the certificate, you would not be eligible for the deduction. The recipient of interest income who issues the certificate is liable to pay tax on the interest income that he receives. As far as the principal payments are concerned, they would not qualify for tax benefit as loans only from notified institutions and banks are eligible for such deductions.
2)Â Â Â Â Â Can I take advantage of tax benefits from a home loan as well as claim House Rent Allowance (HRA)?
Ans: If you took a home loan and are still living in a rented place, you will be entitled to:
- Tax benefit on principal repayment under Section 80C â€“ Repayment of Housing Loan
- Tax benefit on interest payment under Section 24(a) & (b)
- HRA benefit
Of course, you can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete, the HRA benefit stops. If you took a home loan, got possession of the house, have rented it out and stay in a rented accommodation, you will be entitled to all the three benefits mentioned above. However, in this case, the rent you receive would be considered as your taxable income.
3)Â Â Â Â Â I have two housing loans on two different properties. Can I get tax rebate under sec 80 C of both the loans?
Ans: Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled to will be restricted to a total of Rs 100,000 across both the homes.
The interest paid on a home loan is not directly deductible from your salary incomeÂ for either of your flat loans. Income from house property will be calculated for each flat you own. IfÂ either of these calculations shows a loss, this loss can be set off against your income from other heads.
As for Section 24 deduction, on yourself occupied house you can take advantage of interest payments up to Rs.1, 50,000. For the other property, you can claim actual interest repaid, there is no limit for the same.
4)Â Â Â Â Â Why is co-ownership better?
Ans: If you are a married couple, co-owning a house it with your spouse has many benefits. Both can get tax benefits. In case of a joint ownership, the husband as well as the wife individually will be able to claim deductions under Section 24 of the Income Tax Act, for up to Rs. 1, 50,000 for interest. You can claim tax benefits for your principal amount under Section 80 C for a maximum Rs. 100,000. It also enables you to bargain for a bigger loan amount by clubbing your spouseâ€™s income. It also enables easy transfer of property to your children.
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