Showing posts with label Tax section 80EE. Show all posts
Showing posts with label Tax section 80EE. Show all posts
Wednesday, 28 June 2017
Wednesday, 4 January 2017
Home loan is a blessing in disguise as it will help us achieve our desire of owning a home and help us save tax along with it. The maximum tax benefit for repayment of principle which can be availed under 80C is Rs 1.5 lakh. The tax exemption on the interest paid on home loans is now capped at Rs 2 lakh.
Do you know that there is the higher advantage of owning multiple homes and availing loan for the same? Yes, individuals can claim a tax deduction for interest component part in case of the second home also.
Here are some home loan Exemption from the Income Tax to the borrowers;
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First time home loan borrowers In the Union Budget 2016, a new section 80E was introduced to benefit first time home loan borrowers. The government proposed an additional deduction of Rs 50,000 on interest payment of home loan EMI.
Note that this benefit is over and above the earlier limit which was 1.5 (principle)+ 2 lakh (interest) =3.5 lakh.
First-time borrowers can avail additional Rs 50,000 on the interest component. So, total and maximum tax benefits one can avail is Rs 4 lakh per year.
Conditions for first-time buyers
Individuals who are applying for the first time should note that they should not own another house owned by him.
Individuals will be eligible only if the loan availed is less that Rs 35 lacs and the property value are less than Rs 50 lakhs.
While, the loan should have to be approved between 1st April 2016 and 31st March 2017.
Claiming tax benefit under 80C
Home loan borrowers should know that the principle deduction includes all other deductions such as PPF, NSC etc., under section 80C which is capped at Rs 1.5 lakh.
Say, for example, if an individual is claiming the benefit of Rs 1 lakh for repayment of the loan then he will be left with Rs 50,000 to claim for exemptions on PPF, NSC etc., altogether.
Tax benefits for co-borrower
Individuals who are a co-owner and co-borrower of the house can also claim for tax benefits. Note that if you are a co-applicant to the loan, but, the house is not in joint name, you cannot claim tax benefit.
If a home loan borrower is paying the principal amount of Rs 4 lakh, he can avail tax benefit only up to Rs 1.5 lakh under Sec 80C.
In the case of a joint home loan, co-borrower can also claim for Rs 1.5 lakh under sec 80C, together they can get Rs 3 lakhs. So it is always a better idea to jointly go for a home loan and ownership of the house.
HRA
HRA can be claimed if you are living in a rented home despite having your own house, you can avail the HRA benefit along with section 80C and section 24.
Tax benefits under the section can be claimed only when an individual is receiving house rent allowance as a part of his salary.
Individuals who have borrowed the amount from friends and relatives for home loan purpose can avail tax benefits. Note that, individuals will not be eligible for tax benefit on the principal amount, it is only applicable for interest component.
Sunday, 3 July 2016
Finance Act, 2016 has introduced education of interest payable on housing loan for first time home buyers taken from any financial institution over and above the deduction allowed under section 24B. Section 80EE has been amended for this purpose.
The deduction is allowed only to individuals, the maximum limit of deduction is Rs. 50,000 and deduction are available from the financial year 2016-17 onwards. Such deduction is allowed till such loan is recovered.
There is no limit on interest deduction under section 24b for rented properties, therefore this section benefits only the persons who have taken the loan on self-occupied properties.
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Deduction under this section is allowed only if following conditions are satisfied –
(i) the loan has been sanctioned by the financial institution between 1st April 2016 to 31st March 2017.
(ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35 lakhs.
(iii) the value of residential house property does not exceed Rs. 50 lakhs.
(iv) the assessee does not own any residential house property on the date of sanction of loan.
The deduction is allowed over and above deduction under section 24b. Assessee can not take the deduction under both the sections.
Monday, 9 November 2015
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Most of the Tax payers are known about the Income Tax Section 80C where you can relief Max Rs. 1.5 Lakh. And Common Tax Payers only follow this section 80C, and they always follow whether the limit extended or not, which deduction are include in this Section 80C. Most of the Tax Payers are look this Only this Section.
But As per the Income Tax Act 1961, you may get Income Tax Relief from your Source of Income Directly other than Section 80C. Below given a list of Income Tax Section were you can get Relief and this deduction will be reduce your Income Tax. The below given list is shown and follow the New Finance Budget 2015-16. Budget 2015 has been introduced in Parliament. The Finance Minister has kept the Personal Income Tax rates unchanged for the Financial Year 2015 /2016 (Assessment Year 2016-2017).
Section 80CCD:- Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) is proposed in Budget 2015. In FY 2014-2015, the maximum tax exemption allowed under Section 80CCD is Rs 1 Lakh only. In Financial Year 2015-2016 or Assessment Year (2016-2017), this will be Rs 1.5 Lakh (u/s 80 CCD 1 ) and additional exemption of Rs 50,000 u/s 80CCD (1b) will be allowed. ( To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS)
(10% of salary is applicable for salaried individuals and Gross income is applicable for non-slaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary) can be claimed as tax deduction under Section 80CCD (2). The ceiling limit of 1.5 Lakh u/s 80CCD is not applicable on employer’s contribution.)
Section 80D Medical Insurance :-Deduction u/s 80D on health insurance premium will be Rs 25,000, increased from Rs 15000. For Senior Citizens it has been increased to Rs 30,000 from the existing Rs 20,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.
Section 80DD :-You can claim up to Rs 75,000 (increased from the existing Rs 50,000) for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. It is also been proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.
Section 80DDB :- An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens is proposed as Rs 60,000 and for very Senior Citizens (above 80 years) the limit is Rs 80,000
Section 24 (B):- House Building Loan Interest:- You can claim upto Rs 2 Lakh as tax deduction on the home loan interest payment. If your property is a let-out one then the entire interest amount can be claimed as tax deduction.
Section 80EE:- House Building Loan Interest :- You can get another Relief from the House Building Loan Interest U/s 80EE which was introduce in the Financial Year 2013-14 and this Section remain continue for forth comming financial Year. The Max Limit Rs. 1 Lakh and the this relief can get who are HB Interest Paid since 1/4/2013 and onwards.
Section 80U :- You can claim up to Rs 75,000 (increased from the existing Rs 50,000) who have 800% disability. It is also increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability above 80 %
Section 80 TTA :- This Section can get relief from Income Tax from the Savings Bank Interest Max Rs.10,000/- who's taxable Income less than 5 lakh.
Section 87A :- This Section can get Relief from Income Tax as Tax Rebate Max. Rs.2,000/- who's Taxable Income Less than 5 Lakh.
Section 10(13A) : House Rent Exemption Max Rs. 50%,40% or 10% of Basic pay + D.A. + Spl allowances which ever is less [ Download HRA Exemption Calculator U/s 10(13A)
Section 89(1) :- Arrears Relief from Income Tax, some of employees have received the salary amount from his Previous Financial Year, which may break up and can get relief this section and also he have to submit the Form 10e.[ Download the Arrears Relief Exemption Calculator U/s 89(1) with Form 10E, Since 2000-01 to 2014-15 ]
Tuesday, 22 September 2015
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A home loan borrower can claim Income Tax exemption on interest payments of up to Rs 2 lakh U/s 24B and another Rs 1.5 lakh under Section 80 C towards the principal repayment for a Self-occupied property. And another Rs.1 Lakh can get benefits U/s 80EE, Total benefits Rs. 2 Lakh + 1.5 Lakh + 1 Lakh = 4.5 Lakh..
However, you cannot seek these tax benefits in the pre-construction phase (i.e. no tax deductions available for an under construction house), even if you have started repaying the housing loan through EMIs.
Often it is seen that housing loan is taken but the possession of the property is received in the next or later financial years. It may be because the property is not completed or constructed.
The Section 24B of the Income Tax Act states that if a property is still to be constructed, there will not be any tax deduction on the interest payment for all of those years.
However, the interest for the pre-construction period can be availed for deduction in five equal installments from the year the construction is complete.
Let us understand certain terminologies related to an Under Construction house and home loan tax benefits.
What is Prior Period? (Under construction period)
Prior Period means the period from the ‘date of borrower of the home loan up to the end of the Financial Year’ immediately preceding the financial year in which acquisition was made or construction was completed.
The period from borrowing money until the construction of the house is called pre-construction period or under construction period.
For Example: If you have taken a home loan say on 01-06-2013, and the construction of the property is completed on 01-06-2014. The period commencing from 01-06-2013 to 31-03-2014 shall be treated as ‘Prior Period’.
What is Prior Period Interest (PPI)? (Pre-construction period interest)
Prior Period Interest means the interest from the ‘date of borrowal of the home loan up to the end of the Financial Year’ immediately preceding the financial year in which acquisition was made or construction was completed. The interest portion paid during the under construction period / Prior period is known as ‘Prior Period Interest’.
For Example: If you have taken a home loan say on 01-06-2013, and the construction of the property is completed on 01-06-2014. The home loan interest paid for the period commencing from 01-06-2013 to 31-03-2014 shall be treated as ‘Prior Period Interest’.
Let us now consider an example to compute PPI and how it can be claimed as a tax
Kindly remember that the aggregate limits under Section 24 are still applicable. The prior period interest installment plus ‘normal interest’ is allowed to the extent of Rs 2 Lakh only in-case of a Self occupied property. There is no such restriction if the property is a ‘Let-out’ one.
For example : Suppose a home loan is taken on Jan ,2012 and House is completed on 31.01.2015, in that case pre -construction Interest is taken from Jan 2012 to March 2014. Suppose bank has granted and disbursed the Loan in Jan 2012 but EMI started from Jan 2013.Then Interest from Jan, 2012 to Jan 2013 is treated as Pre-EMI interest by the bank.
- Can I get tax benefits if I take a loan to buy a Vacant plot or land? – No. You get no tax breaks if you take a loan to buy a plot of land.
Generally, the prices of under construction properties are lower than the prevailing market rates in a locality. So, some home loan buyers do prefer to buy them. But do it with open eyes, because apart from the obvious risk of delay in construction, you may also get some other financial hiccups if there are long delays.
The delayed possession of the house could exert severe financial pressure on the home buyer if he / she have to pay the EMI as well as the rent at the same time. Moreover, if the project gets stuck or even defaults, the home buyer is still liable to pay the interest and the principal component of the disbursed amount to the bank.
If there is a delay in the possession of the property, the tax benefits also get delayed to that extent.
Saturday, 11 October 2014
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A very important criterion to be kept in mind while taking a Home Loan is the Tax Benefit on Home Loan. To explain the Tax Benefit on Home Loan, we would be dividing the Repayment of Home Loan into 2 components:-
1. Repayment of the Principal Amount U/s 80C Max Rs.1.5 Lakh
2. Repayment of the Interest on Home Loan U/s 24B & 80EE
As the repayment comprises of 2 different components, the tax benefit on home loan is governed by different sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.
The Sections under which Tax Benefit on Home Loan can be claimed are explained below:-
Section 24B: Income Tax Benefit on Interest on Home Loan
Tax Benefit on Home Loan for payment of Interest is allowed as a deduction under Section 24 of the Income Tax Act. As per Section 24B, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.
The maximum tax deduction allowed under Section 24B of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs to Rs. 2 Lakhs).
In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24B.
Please Note: In case a property has not been self-occupied by the owner by reason of the fact owing to his employment, business or profession carried on at any other place, he has to reside at that other place not belonging to him, then the amount of tax deduction allowed under Section 24 shall be Rs. 2 Lakhs only.
It is also important to note that this tax deduction of Interest on Home Loan under Section 24B is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24B should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Moreover, if the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only.
Now, As per Section 24B of the Income Tax Act, tax deduction for payment of Interest would only be allowed from financial year 2011-12 on wards. However, the Interest paid on Home Loan before the completion of Construction (i.e. Rs. 2,00,000) would be allowed as tax deduction for the next 5 Financial years @ 40,000 p.a. commencing from Financial Year 2011-12 onwards. (Easy amounts have been taken in this example for simplification purposes)
Section 80EE :- Income Tax benefits on Interest on Home Loan ( w.e.f. 1/4/2013)
As per the Budget 2013 Speech inserted a new section in the Income Tax Act which provides additional tax deduction of Rs. 1,00,000 to first time home buyers in respect of Interest on Home Loan provided that:-
1. The Loan is sanctioned between 1st April 2013 and 31st March 2014
2. The Amount of Loan sanctioned for the acquisition of Residential House Property does not exceed Rs. 25,00,000
3. The Value of the Residential House Property does not exceed Rs. 40,00,000
4. The Assessee does not own any House Property on the date of sanction of Loan
5. This deduction under Section 80EE is only available for Financial Year 2013-14
The Deduction under Section 80EE shall not exceed Rs. 1 Lakh and shall only be allowed for Financial Year 2013-14. However, in case where the interest payable in Financial Year 2013-14 is less than Rs. 1 Lakh, the balance amount shall be allowed as deduction in Financial year 2014-15.
In other words, in case the taxpayer has only been able to claim Rs. 40,000 as deduction whereas he was allowed a deduction of Rs. 1,00,000, the balance deduction of Rs. 60,000 which the taxpayer was not able to claim in the financial year 2013-14 can be claimed in the financial year 2014-15.
The above 3 Sections relating to Tax Benefits on Home Loans have been summarised as under:-
Particulars
|
Quantum of Deduction (Rs.)
| |
Self Occupied Property
|
Non-Self Occupied Property
| |
Section 24B
|
2,00,000
|
No Limit
|
Section 80C
|
1,50,000
|
1,50,000
|
Section 80EE
|
1,00,000
|
1,00,000
|
TOTAL = 4,50,000/-Can get tax relief
1. The above tax deductions are per person and not per Property. So in case you’ve purchased a property jointly and have taken a joint home loan, each person repaying the amount would be eligible to claim whole deduction separately.
2. If you are living in a rented premise and are taking Tax Benefit of HRA Allowance, even then you can claim Tax benefit on home loan under Section 24B, Section 80EE & Section 80C.
For claiming the above tax deductions, you would be required to furnish the statement provided by the lender clearly indicating the amount payable and paid towards Interest and Principal. After claiming the above deductions of Tax Benefit on Home Loan, the balance Income of an Individual would be taxed as per the Income Tax Slab Rates. (Recommended Read: Income Tax Slab Rates)
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