All about the Interest on home loan is allowed U/s 24b

Who can claim deduction U/s 24B of the Income Tax Act?

• Income tax deduction can be claimed for 2 or more housing loans. The deduction U/s 24B can also be claimed for 2 or more houses. For claiming deduction U/s 24B, Person must be the owner of the house property & also loan should be in his claimant name.

What is exclusions/Inclusions in Interest U/s 24B of the Income Tax Act?

• The said Interest will includes prepayment charges, service fees, brokerage, commission etc.
• penalty on unpaid interest/ Interest shall not be allowed as deduction.

What is maximum Deduction Limit U/s 24B of the Income Tax Act?

• The maximum deduction limit on the interest of a loan is INR 2,00,000/- It is applicable for both self-occupied housing property or rental house property. Individuals owning 2 self-occupied housing properties can claim a deduction on the interest U/s 24B of the Income Tax Act.
• if a person owns two or more house property, then the total deduction for that person remains the same.
  • Self-occupied House (SOP) – INR 2,00,000/-
  • In deemed to be Let Out/ let out property – INR 2,00,000/-
• This is to be noted that income deduction u/s 24b Limits of deduction are applicable assessee wise & it is not property wise.

Whether the interest on capital of partners can be allowed as a deduction U/S 24(b)?

• Home loan interest may be deducted from taxable income under Section 24(b) of the Income Tax Act. Such a loan should be obtained for the acquisition, building, repair, or reconstruction of real estate for homes.
• According to decision of CIT v. Sane & Doshi Enterprises [ITA NO. 1477 OF 2009], interest paid on partners’ capital used to build property from which rental income is derived is allowable as a deduction.
• If all of the interest paid on the partners’ capital was related to the property that the assessee rented out but that was built or bought with the partners’ contributions, the deduction for interest on partners’ capital may be allowed as per Under section 24(b) under income tax Act.

Other matter

• In case the partnership firm has constructed the godown from borrowed capital on which the interest has been paid to partners like outside parties, So it will be allowable deduction Under section 24(b) under income tax act

Comparison between Section 80C & Section 24B

• Interest on home loan is allowed U/s 24b while principal on home loan is allowed U/s 80C. Difference between 80C and section 24b is mention below:-

Particulars about the Deduction	Section 80C	Section 24b
Income Tax Deduction allowed only for	Principal only	Interest only
Tax Deduction Basis	Cash Basis	Accrual Basis
Deduction Amount	INR 1,50,000  (From AY 2015-16)	Self-occupied property: INR 2,00,000 (From AY 2015-16) Other than Self-occupied property: No limit
Loan Purpose	Construction of a new House Property/ Purchase of a new House Property	Construction/  Purchase/  Repair/ Renewal/ Reconstruction of a Residential House Property.
Eligibility for claiming Tax deduction	NIL	Construction/ Purchase should be completed within Three years
Restriction on Sale of Property	Tax Deduction claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by him.	NIL
Deduction during construction period	No deduction is available for the principal repayment during the construction/acquisition period.	Interest paid during the construction/acquisition period shall be allowed in 5 equal instalments from the last day of preceding Financial Year in which the construction is completed

Position of House rent allowance with Interest Deduction

• House rent allowance U/s 10(13A) & interest deduction can be availed simultaneously even if house property is in same city in which you resides on rented property.
• Income tax form 12BB is to be submitted with employer, if you want your employer to take deduction under this section into consideration & thus deduct lower Tax deduction at source

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