Income Tax exemption on House building Advance (HBA)

We are receiving many doubts from our viewers regarding Income Tax exemption on House
building Advance (HBA) like Under Which section the deduction for Interest component
and Principle have been made? What are the benefits announced in the budget regarding HBA ?
.

on Feb 28, When Presenting the Union Budget in the Lok Sabha , the Finance Minister Shri
P.Chidambaram proposed that a person taking a loan for his first home from a bank or a housing
finance corporation upto Rs.25 lakh during the period 1.4.2013 to 31.3.2014 will be entitled to an
additional deduction of interest of Rs.1 lakh.

The Finance Minister hoped that this will promote home-ownership and give a filip to a number
of industries like steel, cement, brick, wood, glass etc besides jobs to thousands of construction
workers.

This deduction will be over and above the deduction of Rs.1.50 lakh allowed for self-occupied
properties under Section 24 of the Income Tax Act. If the limit is not exhausted, the balance may
be claimed in AY 2015-16.

The following article which has been posted in Taxguru.com given below will hep you clear
your doubts on Income tax exemptions over HBA

1 . What are Income tax benefits of taking and repaying a housing loan under EMI Plan?

You will be eligible to claim both the interest and principal components of your repayment
during the year.

•

Interest can be claimed as a deductionunder Section 24. You can claim up to Rs. 150,000
or the actual interest repaid whichever is lower. (You can claim thisinterest only when
you are inpossession of the house)

•

Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is
subject to the maximum level of Rs 100,000 across all 80C investments.

•

You will need to show the statement provided by the lender showing the repayment for
the year as well as the interest & principal components of the same.

2 If I buy a house jointly with my wife and take a joint home loan, Can we both claim income tax
deduction?

Ans:-Yes, if your wife is working and has a separate source of income, both of you can claim
separate deductions in your income tax returns.The repayment of principal amount of the
loan can be claimed as a deduction under section 80C up to a maximum amount of Rs.1 lakh
individually by each co-owner.

In cases where the house is owned by more than one person and is also self-occupied by each
co-owner, each co-owner shall be entitled to the deduction individually on account of interest
onborrowed money up to a maximum amount of Rs. 1.5 lakh. If the house is given on rent, there
is no restriction on this amount. Both co-owners can claim deductions in the ratio of ownership.

3. My husband and I have jointly taken a home loan. He pays 75 percent of the EMI. What will
be our individual tax benefits?

Ans: – As you have taken a joint home loan, both of you are eligible for tax exemption for your
share of the EMI paid. For claiming income tax deduction, the EMI amount is divided into the

principal and interest components. The repayment of the principal amount of loan is claimed
as adeduction under section 80C of the Income Tax Act up to a maximum amount of Rs. 1lakh
individually by each co-owner. The repayment of the interest portion of the EMI is also allowed
as adeduction under section 24 of the Act, which is given under the head “income from house
property”. In case you are living in the house for which home loan is taken, both of you shall
be entitled todeduction in the ratio (3:1) on account of interest on borrowed money up to a
maximum of Rs. 1.5 lakh individually. If the house is given on rent, there is no restriction on this
amount and both co-owners can claim deduction in the ratio of ownership- 3:1 in your case.

4. plan to buy a house by raising loans from friends and relatives. Will I be eligible for tax
benefit from all sources?

Ans: – Interest payment to friends and relatives can be claimed u/s 24 but only against a
certificate received from them. In the absence of the certificate, you would not be eligible for
the deduction. The recipient of interest income who issues the certificate is liable to pay tax on
the interest income that he receives. As far as the principal payments are concerned, they would
not qualify for tax benefit as loans only from notified institutions and banks are eligible for such
deductions.

5. What are the tax benefits that I can avail of for repaying a home loan ?

You will be eligible to claim both the interest and principal components of your repayment
during the year.

•

Interest can be claimed as a deduction under Section 24. You can claim up to Rs.
150,000 or the actual interest repaid whichever is lower. (You can claim this interest only
when you are inpossession of the house)

•

Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is
subject to the maximum level of Rs 100,000 across all 80C investments.

•

You will need to show the statement provided by the lender showing the repayment for
the year as well as the interest & principal components of the same.

6 . Can I take advantage of tax benefits from a home loan as well as claim House Rent
Allowance (HRA) ?

If you took a home loan and are still living in a rented place, you will be entitled to:
1. Tax benefit on principal repayment under Section 80C
2. Tax benefit on interest payment under Section 24
3. HRA benefit

Of course, you can claim tax benefits on the home loan only if your home is ready to live in
during that financial year. Once the construction on your home is complete, the HRA benefit
stops. If you took a home loan, got possession of the house, have rented it out and stay in a
rented accommodation, you will be entitled to all the three benefits mentioned above. However,
in this case, the rent you receive would be considered as your taxable income.

7. I have a home loan in which I am a co-applicant. However, the total EMI amount is paid by
me. What is the total income tax exemption that I can avail of ?

Yes, you can claim income tax exemption if you are a co applicant in a housing loan as long as
you are also the owner or co owner of the property in question. If you are only person repaying
the loan, you can claim the entire tax benefit for yourself (provided you are an owner or co-

owner). You should enter into a simple agreement with the other borrowers stating that you will
be repaying the entire loan. If you are paying part of the EMI, you will get tax benefits in the
proportion to your share in the loan.

8. I have two housing loans on two different properties. Can I get tax rebate under sec 80 C of
both the loans?

Yes, you can get the 80C benefit on both loans. However, the total amount that you will be
entitled to will be a total of Rs 100,000 across both the homes.

The interest paid on a home loan is not directly deductible from your salary income for either of
your flat loans. Income from house property will be calculated for each flat you own. If either of
theses calculations shows a loss, this loss can be set off against your income from other heads.

As for Section 24 deduction, on your self occupied house you can take advantage of interest
payments up to Rs.1,50,000. For the other property, you can claim actual interest repaid, there is
no limit for the same.

9.I live in Delhi in my own house. In 2007, I took a housing loan to fund the purchase of an
under-construction flat in another city (Faridabad which comes under National Capital Region of
Delhi but otherwise falls in Haryana). It is expected to be completed in FY13. I haven’t claimed
any tax benefit so far. What happens to the loan instalments I have paid so far? Can they also be
claimed for tax benefit?

According to the Income-tax Act, 1961, where the property has been acquired or constructed
with borrowed capital, the interest payable on such capital for the period prior to the year in
which the property has been acquired shall be allowed as deduction in five equal instalments
beginning from the year in which the property is acquired. Thus, the interest included in the loan
instalment paid by you during the construction period shall be eligible for deduction from the
year in which the flat is acquired/construction is completed.

The principal amount of the loan repaid till date shall not be available as a deduction under
section 80C till the time the construction of the flat gets completed. Once the flat is completed
and thepossession is handed over to you, you will be eligible to claim deduction for interest
paid on the loan under section 24(b) and principal amount of loan under section 80C. The total
amount ofdeduction available under section 80C shall be limited to Rs. 1 lakh. Thus, as of now,
you are not eligible for any tax benefit on such loan repayments

Income Tax provisions in Union Budget 2013-14

FINANCE BILL, 2013

PROVISIONS RELATING TO DIRECT TAXES

Introduction

The provisions of the Finance Bill, 2013 relating to direct taxes seek to amend

the Income-tax Act, Wealth-tax Act and Finance (No.2) Act, 2004, inter alia, in

order to provide for –

A. Tax rates

B. Additional Resource Mobilisation

C. Measures to Promote Socio-economic Growth

D. Relief and Welfare Measures

E. Widening of Tax Base and Anti Tax Avoidance Measures

F. Rationalisation  Measures

2. The Finance Bill, 2013 seeks to prescribe the rates of income-tax on

income liable to tax for the  assessment year 2013-14; the rates at which tax

will be deductible at source during the financial year 2013-14 from interest

(including interest on securities), winnings from lotteries or crossword puzzles,

winnings from horse races, card games and other categories of income liable

to deduction or collection of tax at source under the Income-tax Act; rates for

computation of “advance tax”, deduction of income-tax from, or payment of

tax on ‘Salaries’ and charging of income-tax on current incomes in certain cases

for the financial year 2013-14.

3. The substance of the main provisions of the Bill relating to direct taxes is

explained in the following paragraphs:-

DIRECT TAXES

A. RATES OF INCOME-TAX

I. Rates of income-tax in respect of income liable to tax for the assessment

year 2013-14.

In respect of income of all categories of assessees liable to tax for the

assessment year 2013-14, the rates of income-tax have been specified in Part

I of the First Schedule to the Bill. These are the same as those laid down in

Part III of the First Schedule to the Finance Act, 2012, for the purposes of

computation of “advance tax”, deduction of tax at source from “Salaries” and

charging of tax payable in certain cases.

(1) Surcharge on income-tax -

Surcharge shall be levied in respect of income liable to tax for the assessment