Buy Home to Reduce Income Tax Burden:- (Prem Shankar Mishra)

As we are in the middle of the financial year , it is time to start planning your tax saving strategies. A house can also be used to reduce the tax liability to a certain extent. Under Section 24 of the Income Tax Act, deduction in respect of interest paid up to Rs 1.5 lakhs (2 lakh from AY 2015-16) per annum on a home loan is allowed.

Loan for construction eligible for deduction under Section 80C

A loan availed for the construction of a residential property, purchase of a residential property, extension of an existing house, and major repairs and renovation of a house are eligible for tax benefits. Under Section 80 C of the Income Tax Act, a home loan borrower can claim a deduction of up to Rs 1 lakh (1.50 lakh from AY 2015-16) from his taxable income on repayment during the year along with specified savings instruments like provident fund.

All co-owner eligible fr deduction of Interest on Home Loan

In case there are co-owners to a property, each of them can claim tax benefits separately , in proportion to their share holding in the property. If the share holding is not mentioned in the purchase deed, they can execute an agreement on a stamp paper, mentioning the shares in the property, and claim tax benefits separately . Co-owners can thus claim a deduction of up to Rs 2 lakhs per annum separately, on interest paid towards a self-occupied house, and also up to Rs 1.5 lakh per annum towards principal amount repaid.

Pre-EMI qualifies for Deduction under section 24

The entire pre-EMI interest amount (the interest paid during the construction period ) is allowed as a deduction under Section 24 of the Income Tax Act equally over five years (20 percent of total interest paid per annum), starting from the year in which the construction is completed.