In 2022, I took a home loan from HDFC to purchase a flat and have been claiming a refund on the interest component under Section 24 and the principal component under Section 80C while filing income tax returns. The interest component was around ₹1.75 lakh for the last financial year. I have applied for another loan for ₹75 Lakhs for an under-construction house for which EMI starts in August 2024. Till then, I have paid only interest before EMI. Please clarify whether the interest before EMI qualifies for tax rebate. Can I claim a rebate for the interest component under Section 24 for both loans? The first house is on rent and the second one is being constructed and will be delivered by December 2024. I have been following the old tax regime.
Assuming that the apartment under construction is delivered at least in the last quarter of the 2024-2025 financial year and the option continues to be chosen old tax regimeThe answers are as follows: The deductions for mortgage loans They are only available from the year in which construction is completed and possession is obtained, where applicable, the financial year ending March 31, 2025.
Guidelines for interest deduction before EMI for home loans: Key points
The total of all pre-EMI interest paid up to 31st March 2024 will be available as deduction in 5 equal instalments from the financial year ending on 31st March 2025 i.e. one-fifth of the total pre-EMI interest can be claimed from the year in which you take possession of the property. The entire pre-EMI interest, if any, paid during the year 2024-2025 will be allowed during the same year and will not be added towards the claim of 1/5th. This deduction and the interest payable for the financial year will be subject to an overall limit of Rs. 2 lakhs if the property is self-occupied. Any principal portion of the loan repaid up to 31st March 2024 i.e. the year before you get possession will not be eligible for any deduction under section 80C. The aggregate deduction available for repayment of all home loans taken together under section 80 C is restricted to Rs. 1.50 lakh, along with the other eligible items qualifying for Deduction according to article 80 C in one year.
According to section 24, the total amount of interest paid on the loan taken on the rented property can be claimed. However, the loss in terms of ownership of the house can be up to ₹2 lakh is allowed to be set off against other income during the year, and the loss not so set off can be carried forward for eight years, which can be set off against positive income, if any, under the title of house ownership.
Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on his X account.
The total of all pre-EMI interest paid up to 31 March 2024 will be available as a deduction in 5 equal instalments from the financial year ending 31 March 2025.
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