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Repaying a housing loan? There is a lot to look
forward to by way of deductions and rebate.
Interest paid on capital borrowed for the acquisition or construction of
property is entitled to a deduction. The maximum amount eligible for
deduction is Rs 150,000. You also get a 20% rebate on repayment of
principal of the housing loan. While this was earlier subject to a
maximum of Rs 20,000.
Conditions
You should be residing in the home for which the
loan is taken. If you are residing in a city but buying property in your
home town to prepare for retirement, this will not be applicable.
Points to note
You may find it more convenient and cheaper to
finance the property out of your own resources. But do remember, you
would be losing the tax shelter on account of the deduction available as
well as the tax rebate. You can claim a rebate for housing loan only on
producing the interest certificate from the lending institution. Taking
a loan from a family member or a friend may get a you a cheaper rate of
interest, or no interest at all, but will not qualify for such
deductions. Only loans taken and interest paid thereon, to specified
financial institutions which offer housing loans, qualify for deduction
under the Income Tax Act, 1961.
If the loan is jointly taken by you and your
spouse, you both are entitled to tax benefits. Since both will be
claiming the deductions and rebate, you will have to approach the
financial institution and ask for a certificate. This certificate will
state how much of the loan is your responsibility and how much you are
contributing towards the repayment. Your tax deduction and rebate can be
calculated based on this amount.
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