Understanding Tax Deductions for Home Loans: Are They Separate from Investment Exemptions?

Hi,

Can anyone please brief me on the tax deduction facilities available for a housing loan? Is the tax exemption for Housing Loan principal and interest payments part of the tax exemption for investments (mutual funds, NSC, etc., up to 1 lakh max), or is it an additional option other than the investments? Can someone please provide details on the same?

Awaiting a positive response.

Thanks in advance,
KK2202

Hi,

The housing loan principal comes under the same bracket of Rs. 1,00,000/-. Investments up to 1 lac in PF, VFP, PPF, Insurance Premium, housing loan principal repayment, NSC, ELSS, etc., are deductible from the taxable income under sec 80C (there is no limit on individual items, so all 1 lac can be invested in NSC, for example).

Interest on Housing Loan:
There is an exemption for interest on a housing loan. If the loan was taken before Apr 1, 1999, the exemption is limited to Rs. 30,000/- per year. If the loan was taken after Apr 1, 1999, the exemption is limited to Rs. 1,50,000/- per year if the house is self-occupied; there is no limit if the house is rented out. This exemption is available on an accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether you've paid it or not.

I am attaching herewith the Tax Calculator, which will give you a clearer picture of the rules.

Best Regards,
Tina

Hi Lavena,

Thank you very much for the details. Thanks a lot. I still have some doubts. You have mentioned that "there is no limit for the interest amount if the house is rented." What does it imply? Does it mean there is no maximum limit (1.5L), or there is no deduction for that? Can you please clarify?

Thanks in advance,
KK

Hi,

Sorry! I missed with the statement. The maximum limit of interest rate for a house loan is as follows:
- If the loan is taken before April 1, 1999, the exemption is limited to Rs. 30,000 per year.
- If the loan is taken after April 1, 1999, the exemption is limited to Rs. 1,50,000 per year.

The maximum interest exemption is Rs. 1,50,000.

If the house is rented, there is a completely different computation of House Property Income, which you will have to coordinate with a CA. However, for the calculation of salary, we can provide a maximum exemption of Rs. 1,50,000 on interest.

Best Regards,
Tina

Hi Lavena,

I think I got the point. Thank you very much for providing me with those details. Does self-occupied mean that I have to reside there if a loan is taken in my name or is it the same if only my parents stay there?

Thanks & regards,
KK

Dear KK,

If your parents are staying in your home, then there are two possibilities:

1) The house loan should be in your name. If you are NOT staying there and your parents are staying, that means you are staying in a rental home. But you can claim either HRA or home loan; you cannot claim both.

2) Secondly, if you have 2 home loans, you can claim either one of your choice for tax exemption but not both.

Best Regards,
Tina

Hi,

Could you please provide me with a brief overview of the tax deduction facilities available for educational loans? Specifically, I am curious whether the tax exemption for both educational loan principal and interest payments is part of the tax exemption for investments (such as mutual funds, NSC, etc., up to 1 lakh max) or if it is an additional option separate from investments.

I would greatly appreciate it if someone could provide detailed information on this matter.

I am looking forward to a positive response.

Thanks in advance,
Priyank

Hi,

Can anyone brief me on the tax deduction facilities available for a housing loan? Is the tax exemption for housing loan interest payments part of the tax exemption for investments (mutual funds, NSC, etc., up to 1 lakh max), or is it an additional option apart from investments? If not, how is the tax exemption up to 1.5L calculated, considering only interest when the loan started after 1999?

Does that mean the principal amount is included in the investment (max 1.0 L) and interest (max 1.5L) is an additional exemption? Is this true? Can someone provide details on the same?

Awaiting a positive response. Thanks in advance.

Hi,

For the following two cases, one might need to arrange for money:

1. Down payment (10-15% of the property value, as fixed by the bank).
2. If the builder demands some money in cash.

For any of the above cases, one might need to avail of some other loan. Can tax deduction be claimed for this kind of loan?

Regards,
Vinayak Bhat