Income Tax Act provides a part of the tax head known as “Income Tax House Property” under Section 22 to Section 27. According to the Income-tax Act, interest either paid or to be paid for the construction, reconstruction, or repair of the house is tax-deductible.
In the case of self-occupied property, the maximum deductible amount can be Rs30,000 per annum. Rs1.50 lakh is deductible for all of the finances which are borrowed for 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 deductible under the Income Tax act.
Other relevant provisions are mentioned in Section 24 of the Income Tax Act. The interest amount is allowed as a tax deduction on a dual basis.
The criteria are that you should borrow money for activities like construction, refurbishment, or redevelopment of the house and the interest should be payable on the borrowed amount.
Property purchased with borrowed sum:
If you have bought any property with the borrowed capital, the interest payable on the sum borrowed is also tax-deductible that has been borrowed before the acquisition or construction of the house.
The Home Loan Interest Rate is deductible in 5 major installments starting from the last year in which the house has been acquired or constructed.
The Capital borrowed for repairs or renovation:
Under the Income Tax Act, a standard deduction of Rs30,000 is allowed against the interest payable on the borrowed Capital for the self-occupied house. Even a deduction of Rs1.50 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 Rs1.50 lakhs shifts to about Rs45,000 in the tax savings of the person. The tax deduction of paid interest reduces the cost-effective cost of the loan.
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