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Tax Planning (80c,80d,80g, housing loan)

Tax Planning (80c,80d,80g, housing loan)

Housing loan which section: Customers availing of Home Loans can claim a certain portion of the interest and principal that they pay towards the loan installments for reducing tax liability. Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Moreover, an added tax benefits under Sec 80 C on repayment of principal amount up to Rs. 1,00,000 p.a. can be availed that can further reduce your tax liability by about Rs. 30,000 p.a.

Tax benefits can be claimed on both the principal and interest components of the home loan as per the Income Tax Act, 1961. These deductions are available to assesses, who have taken a loan to either buy or build a house, under Section 24(b). Interest on borrowed capital is deductible up to Rs 150,000 if the following conditions are satisfied:

  1. Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property.
  2. The acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed.
  3. The person, extending the loan, certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house
  4. A loan for refinance of the principle amount outstanding under an earlier loan taken for such acquisition or construction.
If the conditions stated above are not fulfilled, then the interest on borrowed capital is deductible up to Rs 30,000 though the following conditions have to be satisfied:
  1. Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or renewal of a house property.
  2. Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property.
  3. If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3 years from the end of the year, in which capital is borrowed.

In addition to the above, principal repayment of the loan/capital borrowed is eligible for a deduction of up to Rs 100,000 under Section 80C from assessment year 2006-07.