Tax Rebate on Home Loans

Tax rebate on home loans means that you can save significant part of your tax liability if you have taken a home loan. It works in following manner:
Interest paid on the home loan
As per Sec 24(b) of the Income Tax Act, 1961 a deduction up to Rs. 150,000 can be claimed. This deduction is claimed towards the total interest that we pay on the home loan towards purchase or construction of house property while computing the income from house property.

Interest Paid on Home Loan

The interest payable before you acquire home or start the construction work would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.

In case of self- occupied property, this deduction is allowed only for one such self - occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is eligible for deduction under section 24(b).

Principal repayment of the home loan

As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs. 100,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions. Let us consider a hypothetical example.

Your taxable Income: Rs 5,50,000

Principal repayment for the same year: Rs 1,10,000 and Interest payable for the year: Rs 1,60,000

Total Deductions allowed: Rs 2,50,000 (Rs 1,50,000 towards interest payable & Rs 1,00,000 for principal repayment of the loan)

Thus, your taxable income will reduce to Rs 3,00,000 ( Rs 5,50,000 - Rs 2,50,000 ).

Disclaimer

For the general understanding and reference, the taxation implications given above have been summarized in brief. The tax material is not exhaustive and not intended to be advice on any particular matter. The clients should verify all the facts, law and contents with the text of the prevailing statutes and seek appropriate professional advice before acting on the basis of any information contained herein as the taxation implications may vary depending upon the facts in each case and the tax laws are subject to change from time to time and Indiahousing.com is absolved of any liability to any person, in respect of anything done or omitted to be done by any customer by placing reliance upon the contents of this material