Get Tax Rebate from Your Home Loan

An individual is required to pay tax if his/her income exceeds taxable income. Government provides tax relief for some businesses and individuals who are eligible for deductions available under section 80C of the income tax Act, 1961. You can avail tax relief on home loan principal amount and interest paid. Here are some tips to claim tax relief for principal amount and interest included in your EMI.

Deduction on principal amount

You can get tax relief on your principal amount if it is borrowed from recognized lender such as bank, financial institute or from your company where you are employed. Claim can be made for principal amount of housing loan together with other expenses such as registration fee; stamp duty etc from the financial year in which events like purchase, reconstruction, completion etc occurs. However you will not be eligible for tax relief, if principal amount is repaid before construction of your house. If you paid after completion of construction, you can claim maximum of Rs 1lakhs in a year to deduct from your taxable income.

Deduction on Interest paid

You can avail tax relief for interest paid along with your monthly EMI. You can claim your interest deduction up to Rs 1, 50,000/- . However, you need to either acquire or complete construction of property within three years from the end of the financial year in which loan is taken. Tax relief can be enjoyed if you could not occupy the house due to your business or employment and your house is not let out during the year.

Tax relief and HRA

If you are away from your city or property due to your business or employment and your house is not let out to anybody, you are eligible for tax relief. You can claim deduction u/s 24 for interest on capital borrowed. Principal deduction qualifies u/s80-C. If your employer is providing House rent Allowance (HRA) there would be no bar u/s 10(13A). To avail deduction on home loan and get benefit of HRA, you need to prove that you stayed in rented house in another city and house was vacant for the period.

Tax relief incase of property rented

If your property is rented for the period, you can deduct the full interest amount against income from rent.

For example, If you borrowed a loan and the interest paid along with monthly

EMI is Rs1, 65, 000/-.  Interest paid on Home loan = 165000
Rent per annum = 72000
Balance after deducting rent =165000-72000  = 93000

Write off Rs 93,000 as loss against your salary income and this will reduce your taxable income.

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Tax relief is available to borrowers who are continuing or making prompt payment. If you fail to make EMI payment in time, you cannot enjoy benefit. Claim can be made from only person who borrows the loan and co-borrowers can claim to extent they repay. You need to submit the certificate issued by lending bank stating the principal amount is paid. Same can produced for deduction of home loan paid.