When it comes to filing income tax returns, one of the most important factors to consider is deductions. As per the Income Tax Act of India, there are various deductions that taxpayers can claim to reduce their taxable income. One such deduction is available under Section 24 of the Income Tax Act, which allows for the deduction of home loan interest paid during the financial year.
Section 24 of the Income Tax Act
Section 24 of the Income Tax Act deals with the deductions available on the interest paid on home loans. This section applies to both self-occupied as well as let-out properties. Under this section, taxpayers are allowed to claim deductions for the interest paid on the home loan, subject to certain conditions.
Deductions under Section 24:
Under Section 24, taxpayers can claim deductions for the interest paid on home loans for up to Rs. 2 lacks per financial year. This deduction can be claimed for both self-occupied as well as let-out properties. However, certain conditions need to be fulfilled to claim this deduction.
Conditions for claiming deductions:
- The loan must be taken for the purpose of purchasing or constructing a residential property.
- The construction of the property should be completed within 5 years from the end of the financial year in which the loan was taken.
- The property should not be sold for at least 5 years from the end of the financial year in which the possession of the property was taken.
If these conditions are not fulfilled, the deduction available under Section 24 will be limited to Rs. 30,000 per financial year.
Deductions for let-out properties:
If the property is let out, there is no upper limit on the deduction that can be claimed for the interest paid on the home loan. However, the entire interest paid can be claimed as a deduction only if the rental income from the property is equal to or more than the interest paid on the home loan. If the rental income is less than the interest paid, the loss can be carried forward to the subsequent financial years, subject to certain conditions.
Deductions for joint owners:
If the property is jointly owned, each co-owner is allowed to claim deductions for the interest paid on the home loan in proportion to their share in the property. For example, if two individuals own a property in equal proportions and have taken a joint home loan, they can each claim deductions for 50% of the interest paid.
Conclusion:
Section 24 of the Income Tax Act provides a significant tax benefit to taxpayers who have taken home loans for purchasing or constructing a residential property. By claiming deductions for the interest paid on the home loan, taxpayers can significantly reduce their taxable income and lower their tax liability. However, it is important to ensure that all the conditions for claiming the deduction are fulfilled to avoid any complications during the tax filing process.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions:
What is Section 24 of the Income Tax Act?
Section 24 of the Income Tax Act allows for the deduction of interest paid on home loans for purchasing or constructing a residential property.
Who can claim deductions under Section 24?
Taxpayers who have taken a home loan for purchasing or constructing a residential property can claim deductions under Section 24.
What is the maximum deduction allowed under Section 24?
Taxpayers can claim deductions for up to Rs. 2 lahks per financial year for the interest paid on home loans under Section 24.
Are there any conditions for claiming deductions under Section 24?
Yes, certain conditions need to be fulfilled to claim deductions under Section 24. The loan must be taken to purchase or construct a residential property, the construction of the property should be completed within 5 years, and the property should not be sold for at least 5 years.
Can deductions under Section 24 be claimed for let-out properties?
Yes, deductions under Section 24 can be claimed for let-out properties, but there is no upper limit on the deduction only if the rental income from the property is equal to or more than the interest paid on the home loan.
Can joint owners of a property claim deductions under Section 24?
Yes, joint owners of a property can claim deductions under Section 24 in proportion to their share in the property.
What happens if the conditions for claiming deductions under Section 24 are not fulfilled?
If the conditions for claiming deductions under Section 24 are not fulfilled, the deduction available will be limited to Rs. 30,000 per financial year.
How are deductions under Section 24 claimed?
Deductions under Section 24 can be claimed while filing income tax returns. The interest paid on home loans should be mentioned in the relevant section of the tax return form.
