Purchasing a house is one of the biggest financial decisions that an individual can make in their lifetime. To help taxpayers with this, the Indian government offers tax benefits for housing loans under Section 24B of the Income Tax Act, 1961. In this blog, we will discuss the provisions of Section 24B and how taxpayers can claim deductions for the interest paid on housing loans.
What is Section 24B?
Section 24B of the Income Tax Act, 1961, provides a deduction for the interest paid on a housing loan. This deduction is available to individuals who have taken a housing loan to purchase or construct a residential property. The deduction is available for both self-occupied and rented properties.
Deduction for Interest on Housing Loan
The deduction available under Section 24B is limited to the interest paid on the housing loan. The principal amount paid towards the housing loan is not eligible for any deduction under this section. The deduction is available on a yearly basis, and the maximum deduction limit is Rs. 2 lakhs per financial year.
For self-occupied properties, the maximum deduction limit is Rs. 2 lakhs per financial year. However, if the property is let out, there is no maximum limit for the deduction, and the entire interest paid on the housing loan is eligible for deduction.
Conditions for claiming deduction under Section 24B
To claim the deduction under Section 24B, the following conditions must be satisfied:
- The loan must be taken for the purpose of purchase or construction of a residential property.
- The loan must be taken from a financial institution or a housing finance company.
- The construction of the property must be completed within five years from the end of the financial year in which the loan was taken.
- The individual must be the owner or co-owner of the property.
- The individual must possess the possession of the property.
- The interest must have been paid during the financial year for which the deduction is claimed.
Conclusion
Section 24B of the Income Tax Act, 1961, provides a significant relief to individuals who have taken a housing loan for purchasing or constructing a residential property. The deduction for interest paid on the housing loan is available to both self-occupied and rented properties, subject to certain conditions. Taxpayers should ensure that they fulfill all the conditions for claiming the deduction and keep all the necessary documents to claim the deduction. By taking advantage of the tax benefits provided under Section 24B, individuals can reduce their tax liability and save on their overall tax outgo.
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)
Q1. What is Section 24B of the Income Tax Act, 1961?
Section 24B of the Income Tax Act, 1961, provides a deduction for the interest paid on a housing loan. This deduction is available to individuals who have taken a housing loan to purchase or construct a residential property.
Q2. Who is eligible for the deduction under Section 24B?
Individuals who have taken a housing loan to purchase or construct a residential property are eligible for the deduction under Section 24B.
Q3. What is the maximum deduction limit under Section 24B?
The maximum deduction limit under Section 24B is Rs. 2 lakhs per financial year for self-occupied properties. However, if the property is let out, there is no maximum limit for the deduction, and the entire interest paid on the housing loan is eligible for deduction.
Q4. Can the principal amount paid towards the housing loan be claimed as a deduction under Section 24B?
No, the deduction available under Section 24B is limited to the interest paid on the housing loan. The principal amount paid towards the housing loan is not eligible for any deduction under this section.
Q5. What are the conditions for claiming the deduction under Section 24B?
The following conditions must be satisfied to claim the deduction under Section 24B:
- The loan must be taken for the purpose of purchase or construction of a residential property.
- The loan must be taken from a financial institution or a housing finance company.
- The construction of the property must be completed within five years from the end of the financial year in which the loan was taken.
- The individual must be the owner or co-owner of the property.
- The individual must possess the possession of the property.
- The interest must have been paid during the financial year for which the deduction is claimed.
Q6. Can the deduction be claimed for a loan taken for renovation or repair of a residential property?
No, the deduction under Section 24B is not available for a loan taken for renovation or repair of a residential property. It is only available for a loan taken for the purpose of purchase or construction of a residential property.
Q7. Can the deduction under Section 24B be claimed for a second home?
Yes, the deduction under Section 24B can be claimed for a second home if the conditions for claiming the deduction are fulfilled. However, the maximum deduction limit of Rs. 2 lakhs is applicable for both the properties combined.
Q8. Is the deduction under Section 24B available for commercial properties?
No, the deduction under Section 24B is only available for a housing loan taken for the purpose of purchase or construction of a residential property. It is not available for commercial properties.
Q9. How can the deduction under Section 24B be claimed?
The deduction under Section 24B can be claimed while filing the income tax return. The interest paid on the housing loan must be mentioned in the income tax return, and the deduction can be claimed accordingly.
Q10. Can the deduction be claimed for a loan taken from a friend or relative?
No, the deduction under Section 24B is only available for a housing loan taken from a financial institution or a housing finance company. A loan taken from a friend or relative is not eligible for the deduction.
