The Hindu Business Line : Getting around the housing loan

I PLAN to construct a house in the city I work in. I propose to let out this property on rent. I will, however, continue to stay in a property which is owned by my mother. Will I then be able to claim deduction under Section 80C and Section 24 on the principal repayment and the interest paid, respectively?

Shrini Vasan. S

Reply

There is no prohibition on claiming the deduction under Section 80C and Section 24 on the principal repayment and the interest respectively, whether the property is self-occupied or let out. You can, therefore, claim the said deduction in computing your total income.

Query

I work in a PSU in Bangalore. I reside in a rented house and am availing myself of the exemption under Section 10(13A) in respect of the HRA (house rent allowance) by providing the rent receipts. I propose to purchase a flat in Hubli and take a housing loan for the same. This flat will be used by my dependents.

I will continue to stay at the rented house in Bangalore. Will it be possible for me to claim exemption under Section 10(13A) and also benefit from the deduction in respect of interest on housing loan and its principal amount under Section 24 and Section 80C respectively? Can both husband and wife claim tax benefits on a joint loan taken for constructing a house, when both are employed?

Manjunath

Reply

As regards the first query, there should be no difficulty in claiming the exemption under Section 10(13A) in respect of HRA so long as you get HRA and pay rent. There will also be no difficulty in claiming the deductions under Section 24 and Section 80C in respect of interest and principal repayment respectively on the housing loan. The only issue is whether the property in Hubli can be treated as self-occupied or as being let out and the notional income from such property offered to tax. So long as you don't receive rent from your dependents, you can treat the property as self-occupied and the annual value of the same can be taken as nil. It is assumed that you do not own house property other than the flat that you will be acquiring at Hubli.

With regard to the second query, it should be possible for both husband and wife to claim the deductions under Section 24 and Section 80C provided they are repaying the housing loan out of their own sources, in case the loan is taken jointly.

Query

I have been claiming deduction in respect of interest on housing loan. I now propose to buy another house with a fresh loan. Will I be able to claim the interest on the second loan as deduction?

Shaji Krishnan

Reply

There should be no difficulty in claiming deduction for interest on housing loan and also a deduction in respect of principal repayment of the housing loan, if it is taken from a bank or your employer. You may, however, note that if the properties are self-occupied you can only treat one of them as self-occupied and take its annual value as nil. In respect of the other property, the income which the property would generate if let out on rent, should be treated as the annual value of the property and offered to tax. If, however, any one or both properties are let out, this difficulty will not arise.

Query

My wife and I jointly purchased a flat in May. The total cost of the flat is Rs 21 lakh. I have taken a Rs 18-lakh housing loan. What are the tax benefits that I can claim in respect of the EMI of Rs 15,000?

Anonymous

Reply

The interest portion of the EMI will qualify for deduction under Section 24 in computing the income from house property. The principal portion of the EMI will qualify for deduction under Section 80C in computing your total income. The deduction under Section 24 will be a maximum of Rs 1,50,000 if the property is self-occupied and can be claimed without any limit if the property is let out. You may note that if your wife and you are repaying the loan and interest out of your own resources, it may be possible for each of you to claim the deduction of up to Rs 1,50,000 in respect of the interest.

Insofar as the principal repayment is concerned the deduction under Section 80C will be available up to Rs 1,00,000. But you may note that deduction under Section 80C is also available on payments and contributions such as payment for life insurance, investments in NSC, NSS, PPF etc.

Further, the deduction under Sections 80C, 80CCC and 80CCD in the aggregate cannot exceed Rs 1,00,000. Section 80CCC allows a deduction in respect of contribution to an insurer for a pension fund and Section 80CCD allows a deduction in respect of contributions by new government employees to a pension fund.

Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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