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Section 88 has been replaced by Section 80C.
While all savings are being covered under this section, it is not clear whether the principal amount of the housing loan will be considered since it is a deduction and not a savings.
Kindly clarify.
- P Marathe
As per the proposal in the Finance Bill 2005, the repayment of the principal portion of the loan is clearly allowed as a deduction under Section 80C.
This section is subject to the overall cap of Rs 1,00,000.
I am planning to buy a piece of land and start construction in June 2006.
I will be taking a Rs 10 lakh loan from the bank and another Rs 10 lakh from my parents.
Can I avail of the tax benefit for the entire sum of Rs 20 lakh?
- Mohit Arora
The tax benefits will be available for the first time in respect of the year ending on March 31, 2007 (assuming the construction is completed before that date).
The entire interest payable on both the loans will be eligible for deduction (subject to a cap of Rs 1,50,000) if the property is self-occupied, which means you or your family are residing in it.
In this case, you will need a certificate from both the bank as well as your parents certifying the amount of interest payable.
This certificate will need to be enclosed along with your income tax return.
The principal paid on the loan to the bank will be eligible for deduction under the newly introduced section 80C within the overall limit of Rs 1,00,000.
No deduction is available for repayment as far as returning the loan principal to your parents is concerned.
I have taken a home improvement loan.
Is the principal amount eligible for a tax deduction?
I claim interest deduction under Section 24.
- Raju Bhonslay
The tax rebate under Section 88, which has now been replaced with Section 80C, is applicable only where the loan is taken to 'purchase or construct' a property. It is not valid for a home improvement loan.
I stay in a flat which is registered on my name. I have another one registered on my wife's name.
Since she has no source of income, I stand as the guarantor and pay the EMIs.
Can I claim the tax exemption on the EMIs for both loans?
- Vijay Raj
Only owners or co-owners are eligible for tax benefits in respect of home loan repayments.
If you are not a co-owner of the flat which is in the name of your wife, you will not be eligible for any tax benefits in respect of the repayment of the home loan taken to acquire or construct that property.
Harsh Vardhan Roongta is CEO, Apnaloan.com, and co-author of the book, The Complete Home Loan Guide -- Where To Go, Whom To Ask, What To Do. Click here to check the online book store.
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Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.
