(A) Let Out/Deemed To Be Let Out House.
While calculating house property income in respect of such house property, interest on loan taken for purchase / construction / repairs / renovation etc. is allowed as deduction in full. There is no maximum limit in respect of such interest.
Amount of deduction = Actual interest (without any limit)
(B) In Case Of ‘Self-Occupied House’.
Although net annual value (NAV) is taken as nil in respect of self-occupied house property, yet interest on loan taken for purchase/construction/repairs/renovation etc. of such a house property is still allowed as deduction. The allowability of such interest is a benefit given to individuals and HUFs because it will result into loss under the head house property which can be set-off against other incomes of current ‘previous year’ or of future ‘previous year’ as per rules.
Maximum limit on interest
(1) If loan is taken before 1-4-99. Interest on loan is allowed upto a maximum of 30,000. The purpose of loan may be construction / purchase / repair / renovation / extension, etc.
(2) If loan is taken on or after 1-4-99. (a) For purchase/construction of house property.
Interest on loan is allowed upto a maximum of ` 1,50,00 provided the following conditions are fulfilled.
(i) The construction or acquisition of house property is completed within 3 years from the end of the financial year in which capital was borrowed; and
(ii) The borrower obtains a certificate from the lender specifying the amount of interest payable. The certificate must also specify the purpose of loan, i.e., whether the loan was taken for purchase or construction of house or as a refinance of the earlier loan taken for the construction or purchase of the house.
(b) For repairs etc. or for purchase/construction of house property if such acquisition/. construction is not competed within 3 years as prescribed in point 2(a) above.
Interest on loan is allowed as deduction upto a maximum of ` 30,000.