Top-up loan and income tax benefits

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  1. Ravi Vankadari

    Ravi Vankadari New Member

    I have a question related to Home Loan and Top-up loan.
    I live in Bangalore but I have a house in my native Guntur. I also have housing loan on that house. I usually show that as self occupied house since my parents were living there till 2014. Few questions related to that:
    In October 2014, I transferred the housing loan to another bank and also took top-up loan on top of that. I used the top-up loan proceeds to construct a house in Bangalore. I moved to my new house in Bangalore this February 2016. I also started renting my house in native from 2015-16.
    I read in income tax laws that interest on top-up loan can be exempted if used for house construction. In my situation, can I use that and take exemption for interest paid?
    Also, can I file my house in native as Loss of House Property coupling rent income and deducting interest paid on the loan(home loan + top-up)?
  2. ZED

    ZED Well-Known Member

    Yes, you can but I recommend that you read the following provision and if you have any further query or need any clarification then you may ask.

    Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:—

    (a) a sum equal to thirty per cent of the annual value;

    (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/ *five 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].

    [*five with effect from 1.4.16, for loan taken prior to this date, the period of 3 years shall apply.]

    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.
  3. Ravi Vankadari

    Ravi Vankadari New Member

    I don't understand. Too complicated. Please help
  4. ZED

    ZED Well-Known Member

    Is the construction complete? If, then provide the date thereof.

    Which of the house properties are in your name?
    At a time you can only show one house as a self occupied property.
  5. Ravi Vankadari

    Ravi Vankadari New Member

    Both properties are in my name. Construction of Bangalore property is completed and I moved in February 2016.

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