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Tax advantage for pre-EMI interest on Home Loans

It is good to note that there’s absolutely no limitation associated with “self stay property” with regard to getting tax compensation on interest paid under section 24. Actually, for those who have leased the property, and also receive lease of over Rs. 1.5 Lakhs each year, the interest you shall out (even if it is over Rs. 1.5 Lakhs) is subtracted from the lease obtained.

Moreover do note that, similar to the principal settlement, there isn’t any limitation on the number of property for this advantage — the only limitation is the ceiling of Rs. 1.5 Lakhs. Therefore, if you pay the EMI for 3 property, you can get interest compensation for all the 3 property under section 24 so long as it does not surpass Rs. 1.5 Lakhs.

Pre-EMI Curiosity

 

The financial institution might pay the part payment to a loan applicant or real estate developer with respect to the phase of construction. In this instance, you don’t shell out an EMI; however you shell out a pre-EMI interest.

You can’t get any tax advantage for this pre-EMI interest in the year a person that you have paid it to the financial institution.

You can get back the pre-EMI interest in 5 equated installments after completion of the construction. Thus, you can apply for pre-EMI interest in 5 equated installments from the fiscal year in which the construction is completed and you are allowed to occupy the property.

This particular pre-EMI interest ought to be applied together with the interest portion of the actual EMI under section 24. The entire ceiling for this instance is also Rs. 1.5 Lakhs.

For Example

For instance if you pay Rs. 20, 000, Rs. 30,000 and Rs. 30,000 as pre-EMI interest in fiscal year 2003-04, 04-05 as well as 05-06 respectively.

And if you get ownership in fiscal year 2006-07,then you can get back Rs. 16,000 (A 5th or 20% of the total pre EMI paid by you i.e.: Rs. 80, 000) each year from fiscal year 2006-07 to 2010-11.

Have you been shelling out EMIs prior to obtaining ownership of the property?

Numerous banking institutions pay the entire mortgage even though the construction of the property is incomplete. In this instance, the person will have to commence paying the EMIs right away. In this instance what happens?

In such instance, you don’t obtain any kind of tax advantage on the principal amount for the EMIs that you shelled out prior to obtaining the ownership of your property (you can apply for principal amount only after you obtain ownership of the property).

As mentioned before, you can begin apply for the actual tax advantage of the principal amount under section 80C in the fiscal year in which you receive ownership of the property.

The interest element of the EMIs that you shelled out prior to obtaining ownership of your property ought to be handled much like pre-EMI interest (as described above).

Therefore, you need to accumulate all of the interest that you shelled out as EMIs before you obtain the ownership of the property, and start applying 20% from it every year (for 5 years) beginning  with the fiscal year  in  which you have ownership of the property

House as well as housing loan under Combined Title

For those who have applied for housing loan under combined title, the tax advantage (for the principal payment as well as interest paid) will be offer to both the applicants if the property too has a combined title.

The tax advantage is offered in the fraction of EMIs paid — therefore,  if individual 1 shells out 40% from the EMIs and  individual 2  shells out  60% from the EMIs, the tax advantage would moreover be offered in the fraction of 40% and 60%.


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