Tax benefit on Home loan

Arun 1
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I am taking home loan of 18 lakhs for underconstruction project, to be completed in 2013. Total loan amount of loan will be disbursed by the bank within next two years (till december 2012). The loan amount will be disbused every six months, starting from April 2011. By the end of March 2012, about 12 lakhs will be disbused. Total term is for 20 years.

Please advice me shall I go for EMIs that include Interest plus principle amt....or Only interest, (they say Pre EMI) till possession. I am asking this becuase I heard that I will not get TAX benefit of interest payment till possession. On pronciple amount I can get, but I aleady have 1 lakh savings under 80C. Advise me?

principal emi exemption interest home-loan income-tax
1 Answers

Exemption on home loan interest and principal repayment can only be availed once you have possession of house. All principal amount repaid before possession cannot be considered for tax deduction under 80-C. In case you already have availed deduction of 1 lakh under 80-C, then it does not matter if you pay principal before possession or not.

Interest paid before possession can be claimed for deduction, for next five years starting from possession year in five equal portions. e.g. if you have paid interest of 2 lakhs before possession year, then you can claim an extra 40,000 per year for next 5 years. But total interest deduction will still be 1.5 lakhs.

Pankaj Batra5212

Hi Mr Pankaj, Thanks for providing me insight about tax benefits related to home loan.

Arun•
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