Claim Home loan tax benefits and HRA at the same time ?

POSTED BY jiss.nimmi ON January 3, 2014 12:36 pm COMMENTS (10)

Hi,

I have some queries regarding home loan and HRA.

I bought a flat in bangalore on August 2011 which was under construction at that time. I was paying the home loan EMI from that time onwards. I am staying in a rented house.  As the possession was not done for my new flat, i didn’t claim it in income tax (I didn’t claim home loan principle and interest both. It was a misunderstanding from my end). Now the possession is planned on January 2014.

My queries are as follows:

1) As the possession is on January 2014, can i claim HRA from March 2013 to Jan 2014 in Year 2013-2014 income tax?

2) As the possession is on January 2014, Can i claim the home loan principal and interest for this full year?

3) What about the principal and interests that paid before the possession? As far as i know, i can split the interest amount into 5 equal parts and claim it while submitting ITR file. But i didn\’t claim the principal amounts also in my previous years. How can i do it now?

10 replies on this article “Claim Home loan tax benefits and HRA at the same time ?”

  1. ashalanshu says:

    Dear Kishan, let’s rest it here itself. 🙂

    Thanks

    Ashal

  2. kishanm77 says:

    Dear Ashal,
    I am not able to understand the first sentence. Where did I talk about dates being important or not. Please clarify

    Probably you did not read the comments section of simpletaxindia thread. I had asked to visit the comments section of simpletaxindia thread, where Mr Rajan Gupta answered very clearly that the principal repaid will not be available under section 80c.

    Another link for you
    http://www.caclubindia.com/experts/deduction-u-s-80c-repayment-of-principal-amount-955005.asp#.UtU2yNIW08k

    http://www.caclubindia.com/experts/deduction-u-s-80-c-for-principal-amount-of-housing-loan-247965.asp#.UtU2y9IW08k

    So I think, since facing a disputable situation is not everybody’s cup of tea, I personally would take a decision based on all the available information and would NEVER try to claim the benefit of principal repayment under section 80c for a property which is under construction. To each his own.
    Thanks Ashal for a great, eyeopening discussion.
    God Bless you
    Kishan

  3. ashalanshu says:

    Dear Kishan, if the dates are not that much important, what would you say about capital gains calculations, made on the basis of property booking date?

    From the 2 links shared by you, Simpletaxindia deals only with interest part. The Charteredclub says for precondirion of competed construction but I w’d not value it over the official income tax site version for section 80C.

    The section 24(b) wordings clearly puts construction completion as pre condition but nowhere it’s there in section 80C for principal repayment. Even if an Income Tax Officer wrongly deny my due claim, I w’d prefer to fight it out.

    Thanks

    Ashal

  4. kishanm77 says:

    Dear Ashal,
    I too thought so until 2 years back. I too have read the 80 c rule in detail. But in the eyes of income tax department when a principal of home loan is repaid before possession then it it CANNOT be considered under section 80c. I have had long discussions about this point with Two CAs of my city and a CA of New delhi. I have asked this question online and was answered that 80 c benefit is not available pre possession. Some importanrt links for you
    http://www.simpletaxindia.net/2010/02/interest-on-pre-construction-house-loan.html (see comments)

    http://www.charteredclub.com/tax-benefit-on-home-loan/

    So I think I have made it very clear that 80c benefit cannot be claimed for principal repaid amount for under construction property. As explained to me by one of the CAs: It is because for the eyes of IT you cannot reap the benefits of a product before you are in possession of that product and without reaping the benefits you cannot repay the principal and thus any principal repaid before possession is not considered. It can further be extended that if you are repaying the principal of the loan before possession then it simply means you were not in requirement of the loan to the tune of that amount and that you have furnished wrong declaration that you were in requirement of so much loan and thus such claim can be harmful.
    He was actually describing a true episode where the IT officers had fined the customer for furnishing false declaration for requirement of loan. Hope I am clear.
    Please don’t claim pre possession principal repaid under any head or you may fall flat on face if scrutiny arises, and after possession when you do claim the principal repaid under section 80c then the property should not be sold within 5 years from end of the financial year in which the possession was taken or else all the amount will be taxable in that year.

    Thanks
    Kishan

  5. ashalanshu says:

    Dear Kishan, section 80C does not mention possession of house for principal repayment. The moment, one starts repaying the principal part of home loan, the benefit under section 80c can be claimed. Please read the section 80C in detail.

    Yes in case of home loan interest benefit, possession is pre condition written exclusively in section 24(b).

    Thanks

    Ashal

  6. kishanm77 says:

    Dear Jiss,
    Congrats for your new house. Let me make it clear, any principal paid before the possession of the house cannot be claimed for income tax reduction under any head of income tax neither 80c nor any other head. This rule is one of the lesser known ones. Many people claim it under 80c and get away. That is not because it is correct. It is just because that return has not fallen for scrutiny. If and when a scrutiny is ordered for such a return the tax payee will loose the case. Hence you have not lost anything. Since the possession is due in Jan 2014 you can claim the total principal paid in this financial year under 80c and total interest of this fin. year + 20% of total interest paid before this fin. year under “loss from house property head” upto max 1.5 lacs

    Thanks
    Kishan

  7. jiss.nimmi says:

    Hi Ashal,

    I have utilized only 63000 in 80C in last year, as i was financially tight due to home loan emi and rent. So i have 37000 left.

    Thanks,
    Jiss

  8. ashalanshu says:

    Dear Jiss, the princpal is part of over all limit of 1L Rs. under section 80C. Did you have any scope left there or exhausted full 1L Rs. in prev. years?

    thanks

    Ashal

  9. ashalanshu says:

    Dear Nimmi, you can claim HRA till jan 2014. As the house in question ‘ll be self occupied, the maximum benefit of interest for you in current Fy ‘ll be 1.5L Rs. including 20% from prev. years’ unclaimed interest.

    Please do note, you can not claim prev. years’ unclaimed principal now.

    Thanks

    Ashal

    1. jiss.nimmi says:

      Hello Ashal,

      Can i claim the previous year’s principal amount by re-filing the IT return? Is there an option for that?

      Thanks,
      Jiss

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