"Reducing Tax Through  House Loan Repayment"

 

Sounds strange but the fact remains that you can legally cut down your tax payment just by resorting to house loan repayment.


A straight deduction as mentioned above is available for repayment of housing loan within the overall limit of
` 1,00,000 as per Section 80C. There is now no sub-limit either for claiming deduction in respect of repayment of a housing loan. Thus, if a person now desires he may make repayment of housing loan to the full extent of ` 1 Lakh and enjoy deduction of the entire amount from his taxable income. This benefit can also be availed of by persons having income in excess of ` 5 Lakh per annum

However, please keep in mind that this tax deduction is only permissible in respect of a residential house property.

 

Thus, no deduction will be available if you were to spend money for payment or construction of a commercial house property.

 

It is further provided that the payment on account of purchase or construction of residential house property would include any payment made towards installment or part payment of the amount which is due by the assessee under any self financing or any other scheme of any development authority or the Housing Board.

 

It may be noted here that the benefit of this tax deduction you may enjoy even in respect of payment for installment for residential house due to Housing Board or any other similar authority or even to a Company or a Cooperative Society of which the assessee is a shareholder or a member.

 

A special feature of this tax deduction is that the deduction would be permissible even in respect of repayment of the loan borrowed by the assessee from the Government or Bank or LIC, or the National Housing Bank or from certain categories of institutions engaged in the business of long-term finance for construction or purchase of residential house in India.

 

Similarly, the repayment of loan borrowed from any public limited company as well as the cooperative society engaged in the business of financing, the construction of the house so also the repayment of loan borrowed by the assessee from the employer of the assessee would also be allowed the benefit of tax deduction.

 

It will be worthwhile to note that the repayment of loan from the employer would be allowed the benefit of tax deduction only when the employer happens to be a public limited company or a public sector company or a university or a college affiliated to the university or a local authority or a cooperative society.

 

Thus, the payment for purchase or construction of the residential house so also repayment of the loan in the circumstances mentioned above would be eligible for the deduction. The repayment of the housing loan to the assessee’s employer where such employer is authority or a board or a corporation or any other body established or constituted under a Central or State Act would also be permissible for the benefit of tax deduction.

 

It is also provided in the section that while calculating tax deduction to the assessee on account of payment for cost of the house property the expenses incurred by the assessee towards stamp duty, registration fee and also all other expenses for the purpose of transfer of the house to the assessee would be allowed the benefit of tax deduction.

 

However, if the assessee makes payment of admission fee or cost of the share or the initial deposit, the same will not be eligible for tax deduction.

 

Similarly, expenses incurred by the assessee on cost of additions or alterations or renovation or even the repair of the residential house property incurred after the completion of the house property will not be eligible for tax deduction.

 

Thus, by making repayment of the housing loan or instalment, etc. it is possible to effect tax saving consequent to the tax deduction permissible on such repayment, etc.

 

It may also be noted here that the benefit of tax deduction is permissible to every individual assessee in the family. Thus, if the spouce as well as major child in the family separately make repayment of the housing loan in their individual names, then all of them would be separately eligible for the benefit of the deduction up to a maximum sum of ` 1,00,000.
 
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