Thursday, 18 November 2010

Tax Treatment of Housing Loan While caliming HRA Exemption

As you are aware that you can get Income tax exemption for the amount repaid for home loan. But it is interesting and useful to know some facts about it. You can claim Income Tax Exemption up to Rs. 150000 for the repayment of interest of housing loan from a recognized housing finance institution or Bank under section 24(b) and also can avail exemption up to Rs. 100000 for the repayment of the principal amount of the housing loan under Section 80 C of income tax act. (Under Section 80 C there are so many financial instruments which can claim exemption, but the total amount of Exemption for all these Financial Instruments are limited to Rs. 100000/- and Additional Rs. 20000 for Infrastructure Bonds)

If you have taken loan for the house you are staying in you can claim income tax exemption up to for the repayment of Principal amount up to Rs. 100000 under section 80 C and for the repayment of Interest up to Rs. 150000 per year under section 24(b)

If the house you have purchased through loan in any other city and you are staying in the city you are working, no problem you can claim exemption for the repayment of interest and principal amount of the loan and if you are an employee and getting H.R.A and you are staying in rented accommodation you can claim the exemption of H.R.A also.

If you have taken loan for a house under construction, you can claim exemption only for the repayment of principal amount, but for the repayment of interest you can claim 1/5 of the interest (interest paid till the date of completion) each in 5 consecutive years after completing the house. In this condition you can claim HRA also.

If you are not staying in the house you have purchased through loan with any acceptable reason such as far away from you work place etc. or you have given the house on rent you can claim exemption on loan repayment and HRA. But you have to pay tax for the deemed rent if it is vacant and if it is let out you should pay tax for the rent.

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