Tax deduction on principal repayment of housing loans.
CONDITIONS TO AVAIL DEDUCTION
- This provision is applicable to Individual and HUFs
- The deduction is available only on the principal part of the housing loan repayment.
- The repayment of interest is covered under a different provision under the IT Act.
- The loan should be taken for purchase/construction of a house.
- The purchase/construction should be completed within 5 years from the end of the financial year in which the loan was taken.
- The deduction is available only after completion of the construction and on obtaining a completion certificate. Deduction cannot be claimed during construction.
- The house property should not be sold for 5 years from possession, failing which the deduction will be added back as income in the year of sale.
- Maximum amount of deduction is ₹1.5 lakhs including all other deductions/investments under section 80C such as PPF, LIC, etc.
- Stamp duty and registration charges can be claimed in the year of actual expense.
- Deduction is on payment basis, irrespective of the year for which it is paid for.
- If the loan is taken jointly, then each of the joint owners can claim a deduction for principal repayment under section 80C, up to ₹1.5 lakhs each in their individual tax returns. To claim this deduction, they should also be co-owners of the property taken on loan.
Deduction for first time home buyers
Please note this is covered under section 80EE and NOT under section 80C
- Section 80EE has been reintroduced effective FY 2016-17.
- Additional deduction under section 80EE is allowed for first time home buyers, up to a maximum of ₹50,000.
- To claim this deduction, the amount of loan taken should be less than ₹35 lakhs and the value of property should not exceed ₹50 lakhs.
- The loan must have been sanctioned between 1st April 2016 and 31st March 2017 and the individual should not own any other house property as on the date of sanction of loan.
- The benefit of this deduction will be available till the time the repayment of the loan continues.