Hi
I would like to invite suggestions/comments/feedback from all you learned legal professionals abot a doubt regarding my tax implications on housing loan
I have availed of a home loan on an under construction house from SBI. As per the term of the loan scheme, though bank has been disbursing partly for the home which is under construction, bank has started full EMI collection on the whole amount of loan sanctioned from the first day of starting the disbursement (part disbursement). The scheme says, that from the EMI, interest on the disbursed amount would be collected and the remaining would go towards principal repayment. Also, as per the agreement term of the builder with me, the house is supposed to be completed within 24 months.
As per the terms, SBI has also issued a certificate stating the principal and the interest colected from me for the current FY.
Now, my company, as part of investment declaration for the FY for income tax calculation, has asked to submit the proof of the loss from home , in which they have asked to submit the principal/interest deduction statement, only for fully constructed house. I want to know, if I am paying the principal and interest on my ongoing home loan, am I not supposed to get tax benefit on it? Is there any rule which dictates that home loan (principal/interest) can only avail of the tax rebate for a fully constructed house?
I will be higly obliged if you can kindly pour in your valuable views on the same
Thanking you in anticipation
Indrani Chakraborty
If you have secured a home loan for the flat, its repayment schedule is treated as pre-EMI (equated monthly instalment) till you get the propertyΓÇÖs possession.
Section 88 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.
For the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of
(a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
(c) repayment of the amount borrowed by the assessee from
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or
(6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
(7) the assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or
(8) the assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee, but shall not include any payment towards or by way of
(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or
(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or
(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;
