Owning a residential house is a dream of every person. The privilege of owning a house not only gives you the liberty to operate with ultimate freedom with respect to construction and modification, but also lets you have a status symbol.
One thing that you would be pleased to hear is that even the Government of India wants you to own a house. If you look at the provisions for the Income Tax Act, 1961, you’ll see that there are plenty of leverage that are being offered to tax payers who have recently purchased a house for residential purpose.
Here are some of the exclusive income tax benefits to own a house:
| Deduction | Max Amount | Conditions |
| Section 80EE | Rs.50,000/- | 1) Loan should be taken from bank financial institution for acquisition of residential property 2) Purchase price of house upto Rs.50 Lakh 3) Loan should be sanctioned between 1-4-2016 to 31-03-2017 4) Loan amount up to Rs.35 Lakh 5) Assessee does not own any residential house on the date of sanction of loan. 6) First deduction should be claimed u/s 24 (b) of house property (up to Rs.2,00,000) & remaining u/s 80EE |
| Section 80EEA | Rs.1,50,000/- | 1) Loan should be taken from bank financial institution for acquisition of residential property 2) Stamp Duty value of house property should be upto Rs.45 Lakh. 3) Loan should be sanctioned between 1-04-2019 to 31-03-2022. 4) Assessee does not own any residential house property on the date of sanction of loan. 5) First deduction should be claimed u/s 24 (b) of house property (up to Rs.2,00,000) & remaining u/s 80EEA 6) Where a deduction u/s 80EEA is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provision of this act for the same or any other assessment year. |
| Section 24B | Rs.2,00,000/- | 1) Interest on loan is allowed as deduction, if loan is taken for the purpose of house property i.e. purpose, construction, repair, renovation. 2) Loan may be taken from banks, financial institutions trusts, friends, family etc. 3) Interest is allowed on due basis i.e. if actually paid – allowed, If due -allowed 4) Penal interest is not allowed in default of payment of interest 5) Limit: Rs.2,00,000/-* or Rs.30,000/- 6) For let out property, there is no upper limit for claiming interest. |
| Section 80C | Rs.1,50,000/- | Principal amount – House property should not be sold within 5 years of possession. |
*Section 24 – When max limit Rs.2,00,000/-
- When a loan is taken on or after 1.4.1999.
- When a loan is taken for purchase or construction of house property.
- If loan is taken for construction then construction should be completed within 5 years from the end of the year in which loan was taken.
If the above conditions are not satisfied then the max deduction is allowed only up to Rs. 30,000/-.
#1 – House Loan Deduction under Section 80C
The very first tax benefit that comes to your mind is the house loan deduction. When you purchase a house for residential purpose and avail a loan for the same, the IT department gives you a deduction of INR 1, 50, 000 (upper cap) for loan repayment. This means that if you are paying a monthly instalment of INR 10, 000 per month towards house loan, you would be getting a deduction of INR 1, 20, 000 while computing your payable tax. However, do make a note that the residential property should not be sold before 5 years from the date of possession, else the benefits would be reversed.
#2 – Deduction for payment of Registration Chargers and Stamp Duty
Apart from availing deduction for repayment of house loan, the IT Department also lets you claim deduction in respect of expenses such as registration charges, stamp duty, etc. This benefit is only available in the year of acquisition. The amount would be claimed under Section 80C and the upper cap would remain at INR 1, 50, 000.
#3 – Deduction for interest paid on house loan [Section 24(b)]
Another opportunity lies in Section 24(b). Section 80C lets you grab a deduction in respect of repayment of house loan and Section 24(b) lets you claim a deduction for the interest paid on house loan. Unlike Section 80C, even if you sell your house within 5 years of its acquisition, there would be no tax reversal. Available deduction is INR 2, 00, 000.
#4 – Benefit granted in Budget 2017
In the latest budget, the Finance Minister of India announced that an additional deduction of INR 50, 000 would be available to new house owners. Section 80EE would offer the additional deduction provided the cost of house is not greater than INR 50, 00, 000 and the loan sanctioned amount is not more than INR 35, 00, 000. The deduction is only available if the loan is availed from a house finance company or a financial institute.
#5 – Long-term Gain Exemption
The amount received from the sale of house (owned for more than 3 years) can become tax-free if the owner invests in purchase of another house within 2 years from the date of sale. In case the owners wants to construct its own house, then the grant period is 3 years.
Thus, with the aforesaid provision it is obvious that there are plenty of income tax benefits that are available to a taxpayer when he buys a new house. Have questions? Let us know in the comment section.