FAQ on Income Tax Benefit of Housing Loan

FAQ on Income Tax Benefit of Housing LoanConstruction of my self occupied house has been completed during the financial year. To construct this house I have taken a loan from bank for which I am paying a yearly interest of Rs. 1, 25,000 in addition to the principal amount starting from this year. Can you please let me know if I am eligible for any income tax benefit?

Yes, you can claim income tax benefit for both interest amount and the principal amount. Followings are your eligibility and you can claim deduction accordingly;

Interest of your Housing Loan

You are eligible for the entire amount of Rs. 1, 25, 000 as a deduction of interest on your housing loan. As you have not mentioned the duration of your construction we are assuming that the construction has been completed within a period of 3 years. If it is not completed within a period of 3 years then only Rs. 30, 000 will be allowed as income tax deduction.

Principal amount of your Housing Loan

For the principal amount you can claim income tax deduction of Rs. 1, 00,000 in addition to other investments if any. 

My house is on rent and I have used a loan amount to repair and reconstruct a portion of it. Can I claim deduction of interest amount from house property?

Yes, the entire amount paid as interest for this housing loan will be allowed as a deduction and deduction for the principal amount can also be claimed under section 80C of income tax act.

Earlier I have taken a housing loan for the construction of my house. As my rent amount is not sufficient to pay this loan I have taken a second loan with less carrying interest to pay the earlier loan amount. Can I claim deduction for the interest amount and principal amount of such second loan?

Yes, you can claim the benefit of income tax deduction for the interest amount and principal amount of the second housing loan.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.