As a homeowner, one of the benefits you can enjoy is the deduction on the interest paid on your home loan. This is made possible through Section 24 of the Income Tax Act, which allows taxpayers to claim a deduction on the interest paid on a home loan. In this blog, we will explore the provisions of Section 24 and how it can benefit taxpayers.
What is Section 24 of the Income Tax Act?
Section 24 of the Income Tax Act is a provision that allows taxpayers to claim a deduction on the interest paid on a home loan. The section specifies that the deduction is available for the interest paid on a loan taken for the purpose of purchasing or constructing a residential property. The property must be owned and used by the taxpayer for their own residential purposes.
Deduction on Interest Paid on Home Loan
Under Section 24, taxpayers can claim a deduction on the interest paid on a home loan up to a maximum limit of Rs. 2 lakh per financial year. The interest paid on a home loan is deductible from the income chargeable to tax under the head “Income from House Property.”
The deduction can be claimed on both, self-occupied and let-out properties. In case of self-occupied properties, the maximum deduction that can be claimed is Rs. 2 lakh per annum. However, in case of let-out properties, there is no cap on the deduction that can be claimed.
Conditions for Claiming Deduction
To claim the deduction on interest paid on a home loan under Section 24, the following conditions must be met:
- The loan must be taken for the purpose of purchasing or constructing a residential property.
- The residential property must be owned and used by the taxpayer for their own residential purposes.
- The loan must be taken from a financial institution, such as a bank, housing finance company, or any other institution approved by the government.
- The interest must have been paid during the financial year for which the deduction is being claimed.
It is important to note that the deduction can only be claimed once the construction of the property is complete and possession of the property has been taken.
Conclusion
Section 24 of the Income Tax Act provides a significant relief to taxpayers who have taken a home loan to purchase or construct a residential property. By allowing a deduction on the interest paid on the loan, taxpayers can reduce their tax liability and save money. However, it is important to ensure that all the conditions specified under the section are met before claiming the deduction.
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 (FAQs)
Q. What is Section 24 of the Income Tax Act?
Section 24 of the Income Tax Act allows taxpayers to claim a deduction on the interest paid on a home loan taken for the purpose of purchasing or constructing a residential property.
Q. Who is eligible to claim a deduction under Section 24?
Any taxpayer who has taken a home loan for the purpose of purchasing or constructing a residential property and is the owner of the property can claim a deduction on the interest paid on the loan.
Q. What is the maximum deduction allowed under Section 24?
The maximum deduction allowed under Section 24 is Rs. 2 lakh per financial year.
Q. Can the deduction be claimed on both self-occupied and let-out properties?
Yes, the deduction can be claimed on both self-occupied and let-out properties. In case of self-occupied properties, the maximum deduction that can be claimed is Rs. 2 lakh per annum. However, in case of let-out properties, there is no cap on the deduction that can be claimed.
Q. Can the deduction be claimed on a loan taken for renovation or repair of a residential property?
No, the deduction can only be claimed on a loan taken for the purpose of purchasing or constructing a residential property.
Q. Can the deduction be claimed on a loan taken from any financial institution?
No, the loan must be taken from a financial institution, such as a bank, housing finance company, or any other institution approved by the government.
Q. Can the deduction be claimed if the construction of the property is not complete?
No, the deduction can only be claimed once the construction of the property is complete and possession of the property has been taken.
Q. Can the deduction be claimed by both spouses if they are both owners of the property and have taken a joint home loan?
Yes, both spouses can claim a deduction on the interest paid on a joint home loan. However, the maximum deduction that can be claimed by both spouses combined is still Rs. 2 lakh per financial year.
Q. Is there any limit on the number of properties for which the deduction can be claimed?
No, there is no limit on the number of properties for which the deduction can be claimed. However, the deduction can only be claimed for a property that is owned and used by the taxpayer for their own residential purposes.
Q. Can the deduction be claimed if the property is rented out only for a part of the year?
Yes, the deduction can be claimed on the interest paid on a home loan even if the property is rented out only for a part of the year. However, the amount of deduction will depend on the period for which the property was let out and the amount of interest paid during that period
