cpc

exemption on interest on house building advance

Assistant Registrar

Sir,

I am a govt employee and have availed a House Building Advance of Rs. 5.00 lakhs at 8.5% on IBB (Interest Bearing Balance) Method. 

I am aware of Tax Benefit under section 24b which provides benefit of Rs. 1.5 besides Rs 1.0 lakh.

Since under IBB method, (as I am told) only principal is paid back first and interest is recovered only after full repayment of principal. 

Hence I was never sure if the interest accrued on this loan can also be claimed for exemption under section 24b.

It would be kind enough if you could enlighten me with provisions so that I can also claim this benefit of exemption.

Ashok K Gupta

 
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Lawyer in Hyderabad.wats app no.9989324294

An individual can avail deduction on the principal loan repayment u/s 80 C (Max Limit Rs. 1 lakh) subject to fulfilment of prescribed conditions.

Let us consider an example:

 

Your taxable income is 5,50,000.  Principal Repayment for the same year: 1,20,000 and interest payable is 1,70,000.

Total deduction allowed is 2,50,000 (Rs. 1,50,000 towards interest paid on housing loan and Rs.100,000 on principal repayment)

Total Taxable income is Rs. 300,000 (Rs. 550,000 – Rs. 250,000)

 
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ADVOCATE

You may get a Certificate from the Lender, for the Interst accrued on the loan in each Financial Year, and claim the deduction on its basis.

 
Reply   
 

You can claim dedcution of interest u/s 24, as it is available on accrual basis. However dedcution u/s 80C towards repayment of housing loan is available only on ACTUAL PAYMENT basis.

 
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