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NITIN MEHROTRA (manager)     09 September 2014

Relief under section 24b of it act

I am in service and staying in Varanasi,U.P (due to my profession) in a rented accommodation. I have booked a flat in Noida in April 2011(FY 2011-12). Simultaneously, i also availed of a home loan from bank in April 2011 for which i am paying EMI. The property is still under construction and i don't have any other house property in my name. The flat is expected to be completed and possessed by me in Year 2015-16 only(after 3 FYs from FY of availing home loan). My question is "What is the maximum limit of tax rebate under section 24b (for FY 2015-16) will i get in two scenarios", A) If the flat remains vacant for the whole of 2015-16 as i may not be able to put it on rent. (B) If i am able to let out the property for full or part of the FY 2015-16

Assume that i will continue to reside in a rented accommodation in Varanasi due to my profession


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 2 Replies

PRAKRITI (TAX EXECUTIVE)     11 September 2014

Dear Nitin,

I understand that you have booked a flat in Noida, the construction of which will be completed in year 2015-16. Further, you have also taken a loan on this property on which you are paying EMI. Advice on your queries in light of provisions of the Income Tax Act are as under:

1. Since you are living in varanasi and you can not stay in your newly constructed house in Noida by reason of employment in Varanasi, therefore you can claim the house at Noida as a 'self occupied property' (SOP) provided you have not let it out on rent. The value of an SOP under section 23 is NIL and you are not required to pay anything on the same. Further you get benefit of payment of interest on loan on such house under section 24.

2. However if the said house at Noida is given on rent anytime during the year, then the Annual rent received or which the said house can fetch from market has to be offered to tax under section 22 of the Act. Here you get 30% deduction under section 24(a) on value shown in return of income and also deduction of interest under section .

3. From the payment of EMI, you can derive two benefits namely, interest payment is treated as an expenses u/s 24 and payment of principal amount of loan is taken as Investment and benefit derived under section 80C of the Act. You can get the break up of EMI into interest and principal from the Bank.

4. Under section 24(b), you can get benefit from payment of interest upto Rs. 150000 per year from the date of completion of House. Further, you might have also paid interest during the period of construction of house. For this also, you get benefit of deduction of interest as expenses by amortising the interest paid upto the date of construction for next 5 years.

NITIN MEHROTRA (manager)     13 September 2014

Dear Prakriti, Thanks for replying. 1.I believe, the limit of 150000 is only for SOP(with condition of construction been completed within 3yrs), for rent out property there is no limit. Pls correct me if I m wrong 2. Till I actually rent out my property, it will remain a SOP. In no way it can be deemed to be rented out with notional rent.Please confirm All above with reference to the conditions mentioned in my earlier post.

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