24b Tax Rebate

Section 24b deduction is sometimes referred to as Interest Tax Shield on home loan. It allows income from House Property to be reduced by the amount of interest component of home loan taken for constructing or buying it.

Eligibility for 24b

House property refers to house or any land attached to it. Any kind of borrowing qualifies for section 24b deduction, irrespective of whether it is from a bank, financial institution, friends or relatives. Interest repayment of a loan taken to repay the original borrowing also qualifies for tax deduction.

If you started paying any interest before completion of construction, that portion can be deducted in 5 equal installments spread over 5 successive years starting immediately from the year of completion of construction of the house.

If the loan is taken for construction it should be finished and you should acquire the house within 3 years of borrowing.

You need to produce a certificate from the bank or the lender with details of your interest repayment in order to claim deduction under section 24 b.

Maximum deduction limit under 24b

- For borrowing on house property bought, constructed, renewed, repaired or reconstructed before 1st April 1999:  Rs 30,000

- For loan on house property bought or constructed within 3 years of borrowing provided it was borrowed after 1st April 1999: Rs 1.5 lakhs

- For renewing, repairing or reconstructing house on borrowing after 1st April 1999: Rs 30,000

- For house property bought or constructed after 3 years where capital was borrowed after 1st April 1999: Rs 30,000

- For borrowing on a house property that is let out: entire interest amount payable in that year

Fintotal comment

Income tax deduction on home loan interest is on accrual basis or in plain language on payable basis regardless of whether it was paid in that year or not. Tax deduction on home loan interest cannot be claimed unless it is done in the same year as interest is payable, so claim it even if you do not intend pay all the interest in the same year.

You must get a certificate of interest payable from the lender and can claim it while filing Income Tax Returns by deducting the interest amount from the annual value of the house under the head Income from House Property in ITR form.


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