You can save significant part of your tax liability if you have taken a home loan. Here's how it works :
Interest paid on the home loan:As per Sec 24(b) of the Income Tax Act, 1961 a deduction upto Rs. 150,000 towards the total interest payable on the home loan towards purchase / construction of house property can be claimed while computing the income from house property ( The deduction stands reduced to Rs 30,000 in case of loans taken prior to March 1, 1999 ). The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.
Please remember that in case of self occupied property, this deduction is allowed only for one such self - occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is eligible for deduction under section 24(b).
Principal repayment of the home loan:
As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment upto Rs. 100,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions. Let us consider a hypothetical example.
Your taxable Income: Rs 5,50,000
Principal repayment for the same year :Rs 1,10,000 and Interest payable for the year : Rs 1,60,000
Total Deductions allowed : Rs 2,50,000 ( Rs 1,50,000 towards interest payable & Rs 1,00,000 for principal repayment of the loan)
Thus, your taxable income will reduce to Rs 3,00,000 ( Rs 5,50,000 - Rs 2,50,000 ).
As a finance student i must posses this kind of information and the most important thing is i am dealing with Insurance and tax planning. i hv started this 2 months back. And ur info will be a addition to practical knowledge.
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The limit of Rs. 1.5 lakh mentioned by you is in case of Self occupied properties only. In case the propoerty is let out even for a part of the year, there shall be no limit on this, and entire interest on housing loan is deductible u/s 24(b). Pl correct me if I am wrong.
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