Interest on borrowed capital for self occupied
property
The maximum amount of interest permissible in cases of
self-occupied property is Rs 200000 wef Ay 2015-16 (Rs.1,50,000 up to ay 2014-15) (in
respect of funds borrowed on or after 01.04.1999).
Please note that there is no upper (maximum) limit for
interest on house loan claim for let out house property of deemed to be let out
house property.
If person have more than one house then only one house may
be treated as self occupied.
Where a person has occupied more than one house for
residential purposes, only one house, as chosen by him will be treated as ‘self
occupied’ and all other houses will be deemed to be let out .In regard to one
house treated as used for own residential purposes throughout the year, Section
23 (2) (a) prescribes that annual value of such house shall be taken to be nil,
if the conditions mentioned below are satisfied:
- the property (or part thereof) is not actually let
during whole (or any part) of the previous year; and
- no other benefit is derived therefrom .
Unoccupied property is property which cannot be occupied by
the owner because of his employment/business/profession carried out at any
other place he stays in a rented premise in such other place. Taxation of
income from unoccupied property is same as the Self occupied property.
Interest upto Rs.2,00,000 is deductible if the
following conditions are satisfied:
- Capital is borrowed on or after April 1, 1999
for acquiring or constructing a property;
- the acquisition/construction should be completed
within 3 years from the end of the financial year in
which capital was borrowed; and the person extending the loan
certifies that such interest is payable in respect of the amount
advanced for acquisition or construction of the house or as refinance
of the principal amount outstanding under an earlier loan taken
for such acquisition or construction.
In the above context the following further aspects have to
be kept in view:
1.
If capital is borrowed not for construction/purchase of
house property (e.g. if capital is borrowed for addition, repairs or
renewals of a house property), then the maximum deduction on account
of interest is Rs.30,000 and not Rs 200000 (Rs.1,50,000 up to ay 2014-15).
2.
There is no stipulation regarding the date
of commencement of construction. Consequently, the construction of
the residential unit could have commenced before April 1,1999 but, as long
as its construction/ acquisition is completed within 3 years, the
higher deduction of Rs 200000 wef Ay 2015-16 (Rs.1,50,000 up to ay 2014-15) would
be available.
3.
Also, there is no stipulation regarding the
construction/acquisition of the residential unit being entirely financed
by the loan taken on or after April 1, 1999. It may be so in part.However,
the higher deduction upto Rs 200000 wef Ay 2015-16 (Rs.1,50,000 up to ay 2014-15) can
be taken for the loan which has been taken and utilized for
construction/acquisition after April 1, 1999. The loan taken prior to
April 1, 1999 will carry deduction of interest upto Rs. 30,000 only
(CBDT’s circular No. 779,dated September 14, 1999).
Rs 200000 wef Ay 2015-16 (Rs.1,50,000 up to ay 2014-15) maximum
deduction will not be available in the following situations:
1.
if capital is borrowed before April 1, 1999 for
purchase,construction, reconstruction, repairs or renewals of a house
property;
2.
if capital is borrowed on or after April 1, 1999
for reconstruction, repairs or renewals of a house property;
3.
if capital is borrowed on or after April 1, 1999
but construction is not completed within 3 years from the end of the
year in which capital was borrowed. In the above situations only deduction
upto Rs. 30,000 can be claimed.
Example :If house loan is taken on 01.04.2011 then house must be
completed within three years from the end of financial year in which loan is
taken .In this case loan is taken in Fy 2011-12,so three years completed by
31.03.2015 .So to claim higher deduction of interest of Rs 200000/- you should
complete your house before 31.03.2015.
The above point is important in current situation as most of
persons are buying Flats ,which take more than three years to complete ,so you
must careful while taking such flats through house loan
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