Income tax exemption on home loan interest amount 2012-2013

Interest on Housing Loans Section : 2012-2013

For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt from tax. This deduction is in addition to the deductions under sections 80C, 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1, 1999.

If the house is not occupied due to employment, the house will be considered self occupied.

Income tax exemption on home loan interest amount 2012-2013 : For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act. However, the rent is to be shown as income from such properties. 30% of rent received and municipal taxes paid are available for deduction of tax.

The losses from all properties shall be allowed to be adjusted against salary income at the source itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be necessary

Deduction of Interest u/s 24 is without any limit in case of house property which is charged to tax:

1. If  you have more than one house, in that case , annual value of one house (as per your choice ) is taken as NIL and in case of other house –annual value shall be charged under “income from house property”. The Annual Value of that house will be any one of following whichever is more (generally tax payer takes rent as annual value)

1. actual rent received
2. market rent

2. In case the annual value is NIL, no deduction is allowable. However, only exception is self occupied house . In case of self occupied case , interest upto maximum Rs 1,50,000 is allowed as interest.
3. In case annual value is not nil, interest without any limit (i.e actual amount of interest ) payable on  loan borrowed for the said house property is allowed.
In your case , you have two house. Say , A & B . On A , you have paid interest of Rs 1,70,000 and on purchase or construction of house B , you paid interest of Rs 2,00,000. Say, A is self occupied (or claimed as self occupied) and B is put on rent . Say annual rent is 1,80,000.
House property income in that case shall be computed as under

House A
Annual value                     0
Less
Interest                          Rs,1,50,000
House property income  of A                                       (-) 1,50,000

House B
Annual value                           Rs 1,80,000
Less
Standard deduction 30 %              54,000
Interest on flat B                   Rs 2,00,000
House property income  of B                                       (-)    74,000

Loss from house property (A +B)                               Rs. 2,24,000

 

Can I claim tax benefits on HRA and Home Loan together?

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It is a very common misconception that people who have taken home loan cannot claim tax benefits for both home loan and House Rent Allowance (HRA). HRA is part of salary given by the employer for meeting cost of rent. The tax benefits for home loan fall under Section 80C and Section 24(b) whereas HRA tax benefits fall under Section 10(13A). And as such home loan does not affect HRA and both can be availed.

However there are some circumstances when one might be eligible to get tax benefits or not which are given below:
Living in own House: If you are residing in your own house for which you have taken a home loan, then you can avail deductions for home loan but not HRA since you are not paying any rent.
House under Construction: If the house is not ready for occupation, HRA can be availed. The tax deductions for interest amount of EMI will be applicable only after possession of the house.
Home Far-off: In case your house is far from work place which makes it impossible to stay in or your house is in another city, you can avail tax benefits for home loan as well as HRA.
Home on rent: if you have rented your own house and living in rented place, you can avail tax benefits on both home loan and HRA. However the rent received will be counted in taxable income.
Basically, as long as you are paying rent you are entitled to tax benefits. And if the house is ready for possession, you can get tax benefits for both principal and interest amount. And if particular situation dictates that you cannot reside in your own house, you can claim tax benefits on both home loan and HRA.