Skip to main content

Income Tax Benefits of Housing Loan EMI

Very often taxpayers take loans either for the purpose of buying a house or a flat or a car or for some other personal purposes. They are required to pay equated monthly instalments (EMI) of interest and principal. In some cases both the interest and principal are deductible for purposes of income tax and in some cases it is not so deductible. Hence in this article we have discussed the benefits of EMI under the Income Tax Act mainly in relation to home loans. The section in this article pertains to the Income Tax Act, 1961.



House should be ready for occupation:

One of the most important aspects to be remembered by a taxpayer is that the house or flat must be complete. If the house is not ready or is still under construction, then no deduction either on principal or interest would be allowable and permissible under the Income Tax Act.


Bifurcate EMI into Interest and Loan:

The next important aspect to be remembered by a tax payer is to bifurcate EMI into two parts.


They are

(i) Interest and

(ii) Principal.


This is because the deduction of interest as well as principal is governed by different sections of Income Tax Act. Therefore, this is the most important aspect to be remembered by a tax payer.


Interest on home loan for acquisition and repairs:

Under the provisions of Section 24, a deduction of a maximum of Rs 1,50,000 every year is permissible in respect of interest on home loan if the house is self - occupied. A loss up to Rs 1,50,000 of interest can be adjusted against salary income or business income or income from other sources. If a person has taken a loan for repair of house or flat, a deduction of maximum amount of Rs 30,000 is permissible and that too within the said amount of Rs 1,50,000.


Full interest deductible on let- out house:

If the house is let out by the tax payer, then the entire interest irrespective of the amount is fully deductible under Section 24 of the against income from House Property. In case the interest amount is more than the net rent, the loss under the heading "Income from House Property" can be adjusted against other income. It can even be carried forward in the future years


EMI instalment for acquisition also deductible:

Under the provisions of Section 80C the amount of EMI pertaining to the payment of principal for acquiring the house is allowable within the overall limit of Rs 1,00,000. This is for the purpose of acquiring a house through DDA or other housing board like HUDA or any other housing authority. The overall limit in this case is Rs 1,00,000.


Repayment of loan deductible:

Under the provisions of Section 80C (2) (xviii) deduction up to Rs 1,00,000 in respect of repayment of loan is permissible. .The repayment of the amount borrowed for home loan by the assessee is deductible only if it is from Central Government or any State Government, or any bank, including co-operative bank, or the LIC, or the NHB, or a Public Sector Company providing housing finance, or any co-operative society providing housing finance or where the employer is an authority or a Board or a Corporation or any other statutory body or the employer is a Public Company or public sector company or a university or an affiliated Central Government or a local authority or a co-operative society. Besides, stamp duty, registration fee and other expenses for the purpose of transfer of such housing property to the assessee is also deductible under Section 80C.

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now