Claim Housing loan deduction under Sec 80C – Save Taxes

  Investing in a house through home loan is one of the best tax-planning tools due to the “2 – way” benefits associated with it. In other words you own a house of yours without paying lump sum from your pocket thus saving interest and at the same time pay the installment and avail deduction on both the principal (under 80C) and interest (Sec 24b) part. However, individuals are not clear with the provisions of section 80C and Section 24(b) and they have a belief that the tax benefits under both the sections are same. It is very important to note that deduction under section 80C on principal component of home loan is allowed as soon as you start repaying the home loan. However there are few points which should be noted in this respect:

  • No tax deductions available for the principal amount if the house is under construction.
  • Tax benefit is available subject to condition that the house should not be sold within 5 years from the date of purchase. However if the house has been sold within the period of 5 years then entire deduction provided in the earlier years will be deemed to be income of the assessee in the year of sale and will be taxed accordingly. But the housing loan interest deduction claimed under section 24(b) won’t be reversed.
  • Moreover the home loan should be for a residential property(i.e. commercial property is not eligible for the tax deduction)
  • It is very important to note that deduction for the principal component can be claimed only when the loan has been taken from some bank or financial institution. Thus if the loan is taken from any friend or family then only interest part will be eligible for deduction under Income from House property.
  • Deduction under 80C will not be allowed if the loan is taken for any of the purpose of renewal, repair, extension or renovation.
  • Tax benefit is available irrespective of whether the house property is self-occupied or let out.
  • Tax benefit u/s 80C can be claimed only when the actual payment is made unlike interest deduction u/s 24(b), which is allowed on accrual basis. provides complete tax planning service so that you can save maximum taxes on your earned income. This would help you in formulating the investment plan which will not only lower your tax liability but will also cater your long term investment security plan objective.

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