Income tax on property: A ready reckoner
Housing loan is a significant tax saver because both the interest and principal components offer better tax benefits. Under Section 24 of the Income Tax Act, a maximum of Rs 1.5 lakh can be deducted from taxable income. The principal component of the loan availed can be claimed subject to a maximum ceiling of Rs 1 lakh under 80C. To claim these benefits, the property has to be constructed or acquired within three years from the end of the financial year in which the capital is borrowed. Another important point is that home loan interest is deductible on an accrual basis.
The tax benefits are not only available for home loans from banks and financial institutions but also applicable for loans from other sources like friends and relatives for home renovation, construction etc if you have valid proof. However, the benefit allowed here is only for the interest portion.
Many people buy more than one property without understanding the tax implications. If you own two properties, one will be deemed to be let out even if actually it is not. Tax is applicable on the notional rental income for the property. For a second
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