Deduction for Home Loan

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  1. Mayuri Das

    Mayuri Das New Member

    As we know, principal component is deductible on payment basis and interest on accrual basis. I am a bank employee and for us staff housing loan has a separate system. Out of 360 installments, for first 270 installments only principal is deducted. After that when the whole principal gets paid off, from 271st installment interest component is deducted which had accrued throughout 270 installments. Hence, in my case how will I claim the deductions? As per rule, i have to claim the interest wen gets accrued only. And at the same time only principal is paid so the full payment goes to section 80C. Kindly advise me how can I create a balance and whether i will be able to claim deduction after 270 months when my full principal amount is paid off?
  2. ZED

    ZED Well-Known Member

    In order to claim the deduction on account of interest, assessee has to obtain a certificate from the borrowee stating therein the amount of interest payable by the assessee.

    Since in your case, till 270th installments no interest has been paid but the same would have accrued, you can claim the deduction under clause b to section 24 on accrual basis and the amount would be the one appearing on the certificate.

    For principal amount you should claim the full amount.

    Therefore, you can claim more than the what you actually paid.

    Extracts from S.24(b)
    Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.
    Mayuri Das likes this.
  3. Mayuri Das

    Mayuri Das New Member

    Thank you so much sir. This is really useful and satisfactory. Thank you for your help. One more question I have that can I claim the interest afterwards when actually paid if I want? Or I have no other option than to claim interest before?
    ZED likes this.
  4. ZED

    ZED Well-Known Member

    You have to claim it on accrural basis only because S.145 which gives option for using mercantile basis or cash basis has prescribed the option only in respect of income under the head "income from other sources" and Income under the head "profit and gain from business and profession".

    Since the head of Income from house property has not been claimed and further since the S.24 specifically uses the word "payable" and not paid , therefore, we should apply it on accrual basis only.
    Mayuri Das likes this.
  5. Mayuri Das

    Mayuri Das New Member

    Ok. Thank you. Its absolutely clear to me now
    ZED likes this.
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