To encourage investment in the industry of house properties the government has increased the tax benefits on home loan schemes. These benefits help you to reduce the taxable income, which allows them to pay fewer taxes. Moreover, home loans are funding provided by various financial institutions for the purpose of purchasing a house. This loan debt is later paid in monthly instalments within a maximum tenure of 30 years.
The deduction under section 80 C is available only to a residing Indian individual and a Hindu undivided family. Deduction under section 80 C can only be availed after the construction of the house is completed, but most of the companies allow the deduction under section 80 C even during the construction period. In the same conditions, it is advised by the majority of the Tax Professionals to opt for the deduction under section 80 C only after the construction of the house is completed. Further, to avoid any tax implications it has been suggested to avail of tax benefits under section 80C only after the construction of the house.
The maximum amount of tax benefit that can be claimed under section 80 C towards repayments of home loan is INR 1, 50,000. Although, the overall deduction that is allowed under section 80C includes other components like PPF, LIC, NSC, pension schemes, repayment of home loan, etc must not exceed a budget of INR 1,50,000.
Any payment made by an individual or HUF for repaying the total debt under the scheme of home loan related to the purpose of construction of a house is considered eligible for deduction. But only the portion of the principal amount can be claimed for deduction whereas the interest paid can not be included within that portion. We will further look into the type of payments that qualify under section 80C for the deduction.
Development authority: Every city has its development authority like Kanpur has the Kanpur Development Authority (KDA). As time passed by the development authorities started to allot plots, houses, etc on the basis of instalments. Thus, any amount that has not been paid by way of part payment or monthly instalment of the home loan to the development authority for allotment of houses will be eligible for deduction.
Housing Board: Housing boards are established by the respective states, like Haryana has Haryana Housing Board, and Uttar Pradesh has Uttar Pradesh Housing board. The amount paid by an individual or HUF by any way of part payment or instalment for the procedure of allotment of houses is considered eligible for deduction.
Co-operative society: There are various co-operative societies that allot land and houses to its members in turn of payments in part or monthly instalments over the year. These kinds of payments are also qualified for deduction under section 80C.
Stamp duty and other expenses: while a property is being transferred a certain amount of money is to be paid in court as stamp duty, registration fee, and other legal expenses are included. This kind of expense can be claimed for deduction under section 80C.
Home loan from employer: In some cases, an employer can provide assistance to his/ her employee for purchasing a house. In return, the employee has to make payments to the employer for a period of time in order to repay the assistance. This will be considered as a part of the deduction. It is to be noted that deduction under Section 80C is not permitted if the employer is a Private Limited Company or a Proprietorship Firm or a Limited Liability Partnership Firm. On the contrary, if an employer is a Public Limited company or one of the above, in such cases deduction is allowed to the individual.
Housing Loan from Banks: A borrower can avail of a housing loan scheme from any bank ( like HDFC home loan), NBFC, NHB, LIC, Central government, etc. While repayment of the loan amount deduction qualifies under section 80C. But only the principal amount is eligible for deduction and not the amount paid for interest.
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