Rebate on the home front

July 30, 2016 12:00 am | Updated 02:09 am IST

File IT returns to claim deductions that are available for home buyers.By Shrinivas Rao

A home buyer in India is entitled to claim both the interest and principal components of home loan repayment for tax benefits. Currently, interest payable on self-occupied house is subject to a maximum deduction of Rs. 2 lakh* under “Income from House Property” segment.

If the house is your own and not a rented property, deductions can be claimed against the interest paid on the amount borrowed for purchase, construction, repair or reconstruction of a house.

The tax treatment remains the same if the house is lying vacant or is self-occupied. Besides home loan interest, upto Rs 1.5 lakh can be claimed under section 80C towards the principal repayment and stamp duty registration charges paid during the year.

Further a maximum of Rs. 30,000 can be claimed as pre-construction interest if the loan was taken for repairs, renovation or reconstruction.

A rented property is regarded as a source of income and full interest on any home loan taken towards this property can be claimed. If you own more than one property and both are self-occupied, then one of them is assumed as a rented property. The rental income is assumed as part of your total income.

One can claim 30% of rental income as standard deduction for repairs & insurance. However, to claim these deductions, one must be the sole property owner as well as the principal home loan borrower. Interest cannot be claimed on property owned by spouse or parent although you may be the principal repayment contributor.

In case of jointly owned properties, both co-owners can individually claim tax benefits provided both parties are also co-borrowers. The loan, however, must be taken from a single financial institution and both parties individually contribute towards the monthly interest.

Deduction can be claimed against the ratio of ownership. If such a ratio is non-existent, then the deduction of interest will be decided as a 50:50 ratio, with limit set for each owner/ borrower as Rs. 2 lakh individually.

Municipal taxes

This apart, property owners are also entitled to claim municipal taxes paid to civic agencies. Although a nominal amount, these receipts and certificates should be kept handy while filing returns. Obtaining interest certificates from the lending bank or financial institution is also of primary requisite to claim deductions.

*This is as per Budget 2015-16 as the taxes paid are for the previous FY.

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