Is Loan Amount Taxable?

POSTED BY TheZionView ON February 28, 2011 10:46 pm COMMENTS (9)

It might be silly but still i wanna know. I have a home loan taken recently will the loan amount be included in my income and taxed?

For example if my taxable salary is 2L and loan amount is 10L .Then the tax will be calculated for 12L?

9 replies on this article “Is Loan Amount Taxable?”

  1. trupti says:

    @ashal

    thanks again!

  2. ashal jauhari says:

    Dear Trupti, the F ‘ll be as below –

    F. Tax on E above = 10% of (500000 – 190000) + 20% of (800000 – 500000) + 30% of (950000 – 800000)
    Hence F = 31000 + 60000 + 45000

    In the above calculation, for E more than 8L Rs. the Tax up to 8L Rs. ‘ll remain fix 91000 Rs. for 1.9 to 8L limit for a woman age below 60 (non Sr. Citizen).

    I hope it’s clear to you now.

    Thanks

    Ashal

    1. trupti says:

      ashal

      I got the calculations now.

  3. ashal jauhari says:

    Dear Trupti, If the house is self occupied, the interest benefit is limited to 1.5L Rs. In case you are earning a rental income from this house, there is no limit for Interest benefit, of course, the rental icnome ‘ll be added to your income.

    To answer your query, I assume that your house is self occupied. Contact your bank & demand a provisonal certificate for tax benefit. This certificate ‘ll indicate the interest & principal to be paid within the FY (2011-2012) thru normal EMIs.

    From Your query it seems that the interest part is 16K mly, hence in a general understanding the total interest paid for the FY ‘ll be 16000*12 = 192000 Rs.

    Now point to be noted as the house is self occupied, you are eligible for 1.5L Rs. interest benefit only. Remaining 42K ‘ll not be considered for tax benefit.

    For principal repayment, as your section 80C limit is 1L Rs. & out of which 80K is already covered by Life Ins. prem., PPF & Tax Saving MFs, hence you do have scope for only 20K from Home Loan Principal repayment.

    This ‘ll be your tax calculation.

    A. Gross taxable income = 700000
    B. Income From house property = -150000 (here – signs indicate the loss due to interest amount)
    C. Net taxable income = A +B = 550000
    D. Tax saving done under Section 80C & other sections = 100000
    E. Income chargable to tax = C – D = 450000
    F. Tax on E above = 10% of (450000-190000) = 10% of 260000 = 26000
    G. Edu. Cess & Hr. Edu Cess on F above @ 3% = 780
    H. Total Tax payable = F + G = 26780

    Please feel free to ask more if you ned more help. You may contact manish to get my mail id is you want to discuss it more personally. As per forum policy, I’m not sharing my mail id.

    Thanks

    Ashal

    1. trupti says:

      Thanks Ashal. That was really helpful

      Just to confirm.

      that if the saving of 1 lacs is already occupied with insurance + MF + PPF then we CAN NOT claim the tax benifit on principle repayment.

      For Gross taxable income of 700000 I got the tax calculation showed by you. I was doing the exercise for income of 12 lacs

      the step ‘E’ come as

      E. Income chargable to tax = C – D = 950000

      now there are different tax slabs which is 10% till 5,00,000 then 20% for 5,00,000 to 8,00,000.

      how the step ‘F’ will be calculated here ?

      thanks in advance

  4. trupti says:

    @ashal

    I need some more info on this. Please let me know

    the interest paid on this home loan is limited to only Rs. 1,50,000…am I right ?
    Also

    with the principal repayment you said that it is tax saving under section 80C. Here, what happens if I have already used1,00,000(1 lac) under 80C for other tax saving instruments like PPF, life Insurance, Tax saving MF etc. ?

    in that case how can I claim tax benefits on principal repayment ?

    Please let me know

    I would appreciate if you can give me illustration for below case:

    A person earning 7 lacs per annum.
    — He has life insurance of 15K premium per year,
    — 50000 yearly in tax saving MF,
    — 22108 per month home loan EMI,
    — 15000 in PPF

    now where to subtract the home loan EMI(interest payment and also principle repayment) as we know that for women till 1,90,000 there is no tax.
    so I shall be subtracting interest repayment as
    510000(which is 700000 – 190000) – 192000(suppose the interest payment is 16000, then 16K * 12)

    Please help me to calculate this

  5. bharat shah says:

    a little correction in my reply to the query. the home should be required not to sell for 5 yrs. from the end of financial yr. of its purchase and the loan should be from recognised institute for availing 80c benefit and not to give it back.

  6. bharat shah says:

    add for information, the loan should be from recognised institute , and the home should not be sold for at least 5 yrs. from purchase for availing 80c benefit and not to give it back.

  7. ashal jauhari says:

    Dear Prabeesh, the loan can not be an income. In your case, the said home loan ‘ll be a Tax benefit. Sample this –

    The interest paid on this home loan ‘ll be directly deducted from your total income under section 24(b) & the principal repayment ‘ll be also tax beneficial as the same ‘ll be treated for tax saving under section 80C.

    Thanks

    Ashal

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