Home Loan Tax Deductions

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Home Loan Tax Deductions

Home Loan Tax Deductions

Income Tax Act provides a part of tax head known as “Income Tax House Property” under Section 22 to Section 27. According to this act, interest paid or to be paid for the construction, reconstruction, or repair of the house is tax deductible.  

The maximum deductible amount in case of self occupied property is Rs 30,000 per annum. Rs 1.50 lakh is deductible for all of the funds which are being borrowed for the purchase and construction of the house after April 1,1999.

Home Loan Tax is deductible:

Under the head ‘Income from House Property’, interest on the Home Loan acquired for the purchase of the house is totally deductible under Income Tax act.

Other relevant provisions are included under Section 24 of Income Tax Act. The interest amount is allowed as a tax deduction on dual basis.

The main condition is that you should borrow money for construction, repair or reconstruction of the house and the interest should be payable on the borrowed amount.

Property purchased with borrowed sum:

If you have acquired any property with the borrowed capital, the interest payable on the sum borrowed is also tax deductible that has been borrowed prior to the acquisition or construction  of the house.

The Home Loan Interest Rate is deductible in 5 equal installments beginning from the last year in which the house has been acquired or constructed.

Capital borrowed for repairs or renovation:

Under Income Tax Act, a standard deduction of Rs 30,000 is allowed against the interest payable on the borrowed Capital for the self occupied house.  Even a deduction of Rs 1.50 lakh per annum is available if the loan has been taken for the construction or acquisition of the house.

This higher assumption is not allowed on money borrowed for repairs or renovation of an existing house.

Self Occupied House:

For a self occupied house, the interest deduction of Rs 1.50 lakhs translates to about Rs 45,000 in tax savings of the person. The tax deduction of paid interest reduces the cost effective cost of the loan.

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