Tax benefits on buying house

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  1. office.swati

    office.swati New Member

    We have a house in Thane in my mother in law's name. We are currently living in another city on rent due to job commitments. We are planning to buy a new house in Mumbai in my & my husband's name.
    1. Can we avail the tax benefits of loan as this house would not be self occupied??
    2. If the house is under construction, what tax benefits can be availed before the possession is received?
    3. In case we start staying in this house in a few years time, what will be impact on tax benefits already received in previous years?
  2. ZED

    ZED Well-Known Member

    Regarding which house?

    None, the tax benefits can be claimed u/s 24(b) in respect of the interest component of the loan , from the date of receiving of its possession.

    It should not be sold before 5 years, otherwise the principal amount of the loan repaid would be deemed to be the income in the year in which the transfer is effectuated.
  3. office.swati

    office.swati New Member

    1. Tax benefit on house which we are planning to purchase on our name. Since we are living in another city right now and Thane house is on mother in law's name.
    Hence can we claim maximum limit of tax benefit of interest paid on loan as house not self occupied?
    Last edited: Jul 18, 2016
  4. ZED

    ZED Well-Known Member

    Hello, sorry for the delay.
    You can not claim the full amount of interest as deduction. You can claim interest deduction max upto 200,000 u/s 24(b).
    There is one more provision (S.80EE) as per which additional deduction of upto 50,000 (over an above the 200,000 mentioned above), maybe claimed , subject to the fulfilments of the conditions of the provision. The same has been cited for your reference.

    Let me know if I can assist in some other manner.

    S.24(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

    Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

    Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed two lakh rupees.

    Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

    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.

    Explanation.—For the purposes of this proviso, the expression "new loan" means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.

    80EE. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential property.

    (2) The deduction under sub-section (1) shall not exceed fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2017 and subsequent assessment years.

    (3) The deduction under sub-section (1) shall be subject to the following conditions, namely:—

    (i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2016 and ending on the 31st day of March, 2017;

    (ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees;

    (iii) the value of residential house property does not exceed fifty lakh rupees;

    (iv) the assessee does not own any residential house property on the date of sanction of loan.

    (4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.

    (5) For the purposes of this section,—

    (a) "financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act or a housing finance company;

    (b) "housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.
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