In our previous post we looked at how you can save significant tax by fully utilizing your Section 80C limit. Today we will look at the changes that have been brought in the Interest on Home Loan Deduction in the 2014 Budget. These changes are effective financial year that starts on 1st April 2014 and ends on 31st March 2015.
The benefit on deduction of Interest on Home Loan has been increased to Rs 2,00,000 from Rs 1,50,000 in the case of a Self Occupied House Property. You can claim interest on home loan deduction when –
- You have taken the loan for purchase, construction, repairs or reconstruction of your property
- You own or co-own the property
- You are also a co-borrower for loan for the property
- You can start to claim deductions on interest on home loan beginning the year in which the construction of the property is complete.
Note that – In case your property is Let Out or when you have more than one self occupied property and one or more of your property is considered Deemed to be Let Out – the entire Interest is allowed as a deduction from the Rental of the property.
With the increase in limit of Deduction that can be claimed under section 80C to Rs 1,50,000 – there is an added benefit for those who have home loans. After paying up your loan installments, if you do not have enough surplus left to invest for the purpose of deduction under section 80C – don’t worry – claim your principal repayment for the year under section 80C! You can ask your bank from where you’ve taken the loan to provide you a statement which lists out the detail of your loan installments – how much has been paid towards interest and what is the repayment towards principal. You can claim the entire Rs 1,50,000 in case your principal repayments are of that value. Do remember to disclose these facts regarding your Interest on home loan and principal repayment details timely to your employer – so you can save tax. The employer will adjust these deductions and lower tax will be deducted at source for you – saves you hassle from claiming refunds later.
Lets look at an example, of how you stand to gain from these changes for the FY 2014-15.
Do reach out to us if you have any questions firstname.lastname@example.org and we will be happy to assist you.