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POSTED BY ON September 22, 2013 9:57 am COMMENTS (3)
I have an HDFC home loan.The possession is still awaited. now i want to close this loan a/c as the possession date is still 2 years away I plan to take another loan for ready to move in house(second house) so that the interest exemption from taxable income could be availed. My queries are:
Q.1. I was told by the HDFC executive that if i close the loan a/c, then i will not be able to claim the pre-possession interest exemption over 5 years @ 20% per year subject to max limit of 1.5lakhs. Is this true? If yes should i make a substantial prepayment and drastically reduce my emi so that i can still service the second home loan i plan to take in near future?
Q.2. How much of the interest for the second housing loan would be exempt from the taxable income. I was told there is no limit. Is this true?
Q.3. If answer to Q.2 is yes, then can i avail tax exemption on both the loans simultaneously?( 1.5 lakhs for 1st loan and no limit for second loan)
Q.4 Refer http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=75b4aeaf-f25e-41bd-a339-aa1788291347&rdb=sec&yr=a56ea192-3ca8-433a-a515-ed68a062eac7&sec=24&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws
The loan for first house was under down-payment plan and was disbursed completely in Dec 2009 and EMI started.The possession of the said property is sadly still awaited. Can the interest component of EMI be claimed as exemption ( 20% for 5 years) as it is more than 3 years from the date of loan disbursal and still no possession? If the answer is no, what can be done about it? Any additional loan from HDFC in the same a/c will help?
I would be grateful if you could advise me in this matter.
regards,
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Dear Yashvir, the new additional loan for old house ‘ll not serve any purpose as the basic condition for old loan of completion & possession of your house in 3Y is not fulfilled. If you are not living in your own house, you can very much show the rental income for the 2nd house.
Thanks
Ashal
Dear Yashvir, let me try to answer your queries.
Q.1. I was told by the HDFC executive that if i close the loan a/c, then i will not be able to claim the pre-possession interest exemption over 5 years @ 20% per year subject to max limit of 1.5lakhs. Is this true? If yes should i make a substantial prepayment and drastically reduce my emi so that i can still service the second home loan i plan to take in near future?
To be able to claim any tax benefit on interest part, the possession of the house should be with you on or before 31st March 2013 (3FY time from the original loan disbursed FY). This is not the case for you. Hence you can not claim any interest for tax benefit be it for current interest or for old interest.
Q.2. How much of the interest for the second housing loan would be exempt from the taxable income. I was told there is no limit. Is this true?
If the first house in self occupied & 2nd one is in rent, the rental income ‘ll be added up into your income but at the same time, due to this rental income full interest i.e. no limit, ‘ll be available for deduction.
Q.3. If answer to Q.2 is yes, then can i avail tax exemption on both the loans simultaneously?( 1.5 lakhs for 1st loan and no limit for second loan)
Technically, 1st loan for you is no loan & 2nd house ‘ll be your self occupied house, hence your tax benefit ‘ll be limited to just 1.5L Rs. interest on 2nd house. In case you are living somewhere else & 2nd house ‘ll be on rent, answer no. 2 above ‘ll apply.
Q.4 Refer http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=75b4aeaf-f25e-41bd-a339-aa1788291347&rdb=sec&yr=a56ea192-3ca8-433a-a515-ed68a062eac7&sec=24&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws
The loan for first house was under downpayment plan and was disbursed completely in Dec 2009 and EMI started.The possession of the said property is sadly still awaited. Can the interest component of EMI be claimed as exemption ( 20% for 5 years) as it is more than 3 years from the date of loan disbursal and still no possession? If the answer is no, what can be done about it? Any additional loan from HDFC in the same a/c will help?
No, you can not get any benefit on interest part from this house. Only benefit available to you is principal repayment in section 80C within the over all limit of 1L Rs.
Thanks
Ashal
Thanks for the prompt reply. You did not comment on the second part of last question. Can I go around the 3FY rule by getting HDFC to lend me some amount so that the date of disbursal can be advanced to fit within the 3 fy rule? My additional query is that being a govt employee in a transferable job, staying in govt accomamodation, can I show my second house on rent ? Thanks in advance.