For the FY 2020-21, Salaried individuals, who have no business income, have the option to choose between the old (existing) and new tax regimes u/s 115BAC as per their convenience. There are different types of income allowed as deduction while computing the income chargeable under the old rule. There are different Sections of the Income Tax Act such as section 80( C), 80EE, 80EEA, and section 24 of income tax act which allows owners of the house to claim a deduction of home loan interest on accrual basis, not on actual payment. For more details of benefits under section 24 read: ‘Calculation of income or loss on house property‘ for assessment of income tax.
The repayment principal amount of loan, up to the Rs.150000.00 in a financial year, enables you to get tax rebate up u/s 80 ( c ) of IT Act. Home-owners can claim a deduction of up to Rs 2 lakh on their home loan interest as per section 24(1B) of income tax act. In case of loan availed for the construction of house, the interest deduction can only be claimed, starting in the financial year in which the construction of the property is completed. The other condition is that the purchase or construction must be completed within a period of 5 years, lest interest deduction allowed up to a limit of Rs.30000 only. The period of 5 years is calculated from the end of the financial year in which loan was taken. So, if you have taken a loan for construction of a house during June 2018, the construction of the property should be completed by 31st March 2024.
The joint owners who are also co-borrowers of a self-occupied house property, can also claim a deduction on interest paid on home loan up to Rs.2 lakh each. The each of the joint owners can also separately claim deductions under section 80 C within the overall limits of Rs.1.5 lac on repayment of principal loan amount.However, these deductions are allowed to be claimed in the same proportion as that of ownership share in the property.
In addition to interest deduction of Rs.2 lac under section 24(b), the first time of residential property after April 1, 2019 can claim interest paid rebate of Rs.1.50 lac under Section 80EEA. It means you can save together with Rs.3.5 lac together under 24(b) and 80EEA. The rebate under this section is not available to tax payers who have claimed rebate under section 80EE. Section 80EE was first introduced with effect from the financial year 2013-14 with interest deduction limit of Rs.1 lac. It was reintroduced, effective FY 2016-17 (AY 2017-18) with a deduction up to Rs. 50,000 per year until the loan is repaid.
The appreciation value of house property is high in city/urban areas:
If you think to buy a residential property purely on investment purpose, then it is a good idea to buy residential property in a city/urban area as appreciation on properties faster compared to rural/semi-urban areas and you may get good rent in the urban area if you are not occupying the same.
Click here to know ‘How-to-examine-title-deeds-of-house-property’