The interest amount payable on housing loan borrowed for the purpose of acquisition, construction, renovation, repairing or reconstruction can be claimed as a deduction under section 24 of income tax act.
If you paid interest during the construction period (i.e. period preceding the year of completion of construction) then such interest amount can be accumulated and claimed as a income tax deduction under section 24 over a period of 5 years in equal installments commencing from the year of completion of construction. For example, if you have paid Rs. 25, 000 before completion of construction of your house then such interest amount can be claimed as income tax deduction up to five assessment years starting from the year of completion of construction at an equal amount of Rs. 5, 000 (i.e. Rs. 25000/5)
After completion of construction, you can claim the full amount of interest as income tax deduction under section 24 of income tax act. So both pre construction period interest and post construction period interest can be claimed for 5 years and there after only the post construction period interest of your housing loan will be allowed as a deduction.
If the house property is self acquired and not given on rent then the interest amount available for income tax deduction will be restricted to Rs. 1, 50,000 if such loan has been taken on or after 1st of April 1999 to acquire or construct the house and such acquisition and construction is completed within 3 years from the end of the financial year in which the housing loan was taken.
If the housing loan is used for any other purpose like for repairs or renewal or reconstruction or for a purpose other than acquisition or construction then income tax deduction for the interest amount will be restricted to Rs. 30, 000. Any housing loan taken before 1st of April 1999 and self occupied will be available for interest deduction of Rs. 30, 000. If your house is not self occupied then these restrictions will be not be applicable and as discussed above the entire amount will be allowed as a deduction.
To claim deduction for your interest amount it is really immaterial whether you have paid it or not during the financial year. Once the interest amount is charged by your bank and it becomes payable by you, the entire amount is allowed as a deduction.
The principal amount paid on your housing loan can be claimed as a deduction under section 80C of income tax act, 1961. Section 80C allows you to claim income tax deduction up to an amount of Rs. 1, 00,000. This one lakh limit is allowed if you invest in certain specified investments and pay for certain expenses, principal amount paid for housing loan is one of such item specified for deduction under section 80C. The maximum deduction under section 80C is Rs. 1, 00,00 however the aggregate amount of deduction under section 80C, 80CCC and 80CCD(1) can not exceed Rs. 1, 00,000. If amount invested is less than the specified amount of Rs. 1, 00,000 then such lesser amount will be allowed as deduction under Income Tax Act.
Income tax benefit for house rent allowance can be claimed if you own a house. Such benefit will be available if you are living in a rented accommodation and paid rent for it. Exemption for this allowance can be claimed even if you own the house in the same city.