Interest on Housing Loan
19 Oct 2022
As per Section 24 of Income Tax Act, 1961, under House Property head of Income, interest on home loan is allowed as deduction if the loan is taken for the purchase, construction, repair, renovation of House property.
Limit of Interest allowed as deduction
1. Let Out Property (LOP) / Deemed to be Let Out Property (DLOP)
The entire amount paid as interest on housing loan is allowed in case of LOP OR DLOP.
2. Self-Occupied Property
Interest on loan is allowed upto Rs.30000.
Maximum Rs.200000 is allowed as interest on housing loan if all the following conditions are satisfied:
The loan is taken after 01/04/1999.
It is taken for the purpose of either purchase or construction of house property.
If it is taken for construction then construction should be complete within 5 years from the end of the year in which the loan is taken.
Pre-construction Interest on housing loan
It means the interest paid before the year in which construction was completed. It is allowed in Five equal instalments from the year in which construction was completed.
Interest paid outside India
It is allowed only if TDS have been deducted on such interest
Source of Loan
It is a common misconception that the interest on loan is allowed only if it is borrowed from bank or financial institutions but in actual loan can be taken either from banks or financial institutions & also from friends, family, trusts, etc.
Allowability of Interest
Interest on housing loans is allowed on due basis which means the interest paid as well as interest payable is allowed as deduction.
Interest on interest (Penal Interest) is not allowed as deduction.
Any fresh loan is taken for repayment of earlier loan which was taken for the purpose of house property then interest on fresh loan shall be allowed as deduction.
Frequently Asked Questions
1. Can we claim interest on a housing loan amount of more than Rs.200000?
Ans. Normally speaking, the answer is No as u/s 24 the maximum amount of interest on housing loan allowed is Rs.200000 but you can claim more than that if you fulfil the conditions mentioned in section 80EE or section 80EEA.
2. Can interest paid on housing loan taken from friends & relatives be claimed as deduction while calculating house property income?
Ans. Yes, if the loan from relatives or friends is taken for purchase, construction, repair, renewal or reconstruction of the house.
3. If the loan is taken for repair or renovation of house property, can we claim interest upto Rs.200000?
Ans. No, the maximum amount of interest on home loan for purpose other than purchase or construction of house property is Rs.30000 only.
4. For claiming interest on home loan is it compulsory that the person paying the home loan should be the owner of the house property?
Ans. Yes, it is compulsory.