House Loan Interest Calculation
House Loan Interest Calculation
paid 4 months intt to bank loan for semi finished house.can i get intt & instalment exemption for tax?
purchased a plot under housingloan through bank hgloan. house not completed. As per bank rules if we do'nt pay amt towards recovery in 3 months a/c will go sticky hence paid the interest amt of loan every month.now can i get interest exemption fr salry as well as hg loan instalment under 80c for calculation tax on my salary. I am resident of andhra pradesh India.
If you have secured a home loan for the flat/house, its repayment schedule is treated as pre-EMI (equated monthly instalment) till you get the property’s possession.
Section 80c allows tax rebate only in respect of a house property which is capable of being taxed under "income from house property". A house under construction therefore does not make the grade.
A buyer is entitled to tax rebate under sections 24 (b) and 80 (c) of the Income-Tax Act 1961, after securing possession of the property and thus commencement of EMI. Till then, he gets no tax relief on the pre-EMI. (On principle repayment)
Interest paid during pre-construction period is allowed as a deduction equally over five years starting from the year in which the construction is completed. Let's take an example to make it clear.
Let's say you took a home loan in February 2004.
The property was constructed in July 2005 and final disbursement was done.
During this time -- from February 2004 to July 2005 -- you paid pre-EMI.
Then 1/5th of the total interest paid from February 2004 till March 2005 is available as deduction. This amount can be distributed over the five financial years starting from FY 2005-2006.
The interest you pay from April 2005 till June 2005 is allowed as a deduction in the FY 2005-2006. This is because April/May/June period is excluded from pre-construction period.
Pre-construction period is the period starting from the date when the first installment of the loan was disbursed and ending on March 31, immediately preceding the financial year in which construction in completed (as the example above explains).
http://in.rediff.com/getahead/2006/may/30home.htm
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