Sunday May 6, 03:34 AM
Deductions applicable under U/s 80 C
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By AN Shanbhag & Sandeep Shanbhag
I want to know about the rebates on income tax on repayment of home loans (both interest and principal) -Dr Ramanath The following tax benefits are available on housing loans: U/s 24 deduction up to Rs 30,000 is available on interest on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing, whereas the enhanced limit of Rs 1.5 lakh is applicable on loans taken on or after April 1, 1999 only for acquiring or constructing. The acquisition or construction should be completed within 3 years from the end of the year in which the capital was borrowed. It is possible to claim this deduction on two or more loans. In any case, the ceiling on total amount of deduction is Rs 1.5 lakh in a year. If the house being rented out, the entire interest payable without any ceiling can be deducted from the rent received. It is necessary for the assessee to obtain a certificate from the lender that such interest was payable in respect of the amount advanced for acquisition or construction of the house, or as refinance of the principle amount outstanding under an earlier loan taken for such a purpose. Additional deduction u/s 80C, within the overall limit of Rs 1 lakh for the repayment of the principal amount is available. This deduction is available only on loans for acquiring or constructing a housing property but not for any addition, alteration, renovation or repair. This deduction on repayment of capital is available on loans taken from specific sources whereas for deduction of interest, the loan can be taken from any source. The deduction, u/s 80C, and the interest, u/s 24, are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known. The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the 4 immediately succeeding years. Unfortunately, there is no corresponding provision for the capital repayment. I work for a leading pharmaceutical company. I purchased a mutual fund scheme (ELSS) in favour of my wife and child to claim the tax benefit u/s 80C. However, my employer objected that since the investment wais not in my favour, I could not claim a tax rebate. Is this correct? -Parsvanath Your employer is right. Only for investments in i) life insurance premiums for life cover ii) LIC deferred annuity iii) PPF iv) ULIP and Dhanaraksha are eligible for the deduction with respect to contributions made in the name of spouse and children. For ELSS, the investment has to be in the name of the person claiming the deduction. Can one enjoy HRA exemption and deduction on interest on housing loan and repayment of housing loan principal, all at a time or is it only HRA or interest and principal deduction? -Shirwarkar The two situations under which the exemption cannot be claimed are: - a) the residential accommodation occupied by the assessee is owned by him; or b) the assessee has not actually incurred expenditure on the payment of rent for the residential accommodation occupied by him. If you satisfy these, and the conditions under which you can claim the deductions u/s 24 of interest and repayment of housing loan u/s 80C, you certainly can claim all the three concessions together. I recently purchased a house in my name. However, my wife and I have taken a joint loan for the house. In such a case, if she pays half the EMI, will she be eligible for the interest deduction as well as the principal deduction u/s 80C? -Manjure Both of you could have availed of the deduction individually had the house property been purchased in joint names. Now, the house belongs to you, so even though the loan is in both your names, your wife will not be eligible for the deductions. -The authors may be contacted at wonderland consultants@yahoo.com
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