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January 2, 2022

The quantum of such pre-construction interest is to be divided equally in five instalments.

Q. I am planning to construct a house by taking mortgage loan from a private bank. Will the principal repayment be allowed under section 80C and interest payment under section 24A of the Income Tax Act?

V. N. R. Vinoth

A. By mortgage loan, it is assumed that you are availing an housing loan for construction of house property.

Deductions under Section 24 of the Income Tax Act, 1961 towards interest paid on borrowed capital for construction/purchase can be availed by you for the interest portion of the EMI paid by you. Further, such deduction can be availed only once the construction has been completed. The interest paid during such construction phase can be claimed as pre-construction interest from the assessment year the house property is ready to occupy.

Deduction under Section 80C of the Income Tax Act, 1961 with respect to the principal repayment on the borrowed can be availed by you for the principal portion of the EMI paid by you for a maximum amount of ₹1,50,000 assessment year read with the limits of Section 80CCE of the Income Tax Act, 1961 for a fully constructed house property for which a completion certificate is obtained. During the stage of construction the same cannot be availed.

Q. I availed a housing loan from HDFC Ltd. for the construction of my house in which myself and family have been residing since 2006. I am claiming the I-T exemptions for the principal and interest year-on-year while filing the ITR.

In FY2020-21, my father gave his property to me. We have started constructing a house by availing the staff housing loan of my wife who is working in LIC. This loan is through LIC HFL,in which she is the principal borrower and I, the co-borrower. Can my wife avail I-T exemptions on the loan?

K.Rajeev

A. Deductions under Section 24 of the Income Tax Act, 1961 towards interest paid on borrowed capital for construction/purchase can be availed by only such person who is the owner of the house property or in whose name the property is. Though your wife is a joint borrower of the loan, the house property was given to you by your father de to which deductions with respect to the interest paid on the borrowed capital cannot be claimed by her. Further, such deduction can be availed only once the construction has been completed. The interest paid during such construction phase can be claimed as pre-construction interest from the assessment year the house property is ready to occupy.

The quantum of such pre-construction interest is to be divided equally in five instalments. The maximum deduction for interest and pre-construction in a assessment year is ₹2,00,000 if the property is self-occupied and a maximum loss of ₹2,00,000 can be claimed if the property is let out. You are to also possess a certificate from your lender in order to claim this deduction. Deduction under Section 80C of the Income Tax Act, 1961 with respect to the principal repayment on the borrowed, an amount of ₹1,50,000 can be claimed in a assessment year read with the limits of Section 80CCE of the Income Tax Act, 1961 for a fully constructed house property for which a completion certificate is obtained. Even for the principal repayment, only the owner of the house property or on whose name the property is can avail the deduction benefit. In your case, you may service the entire loan re-payments and claim the deductions in your Income Tax assessment

Q. I am 79 and have been staying at a retirement home in Coimbatore. Our 55-year-old co-operative housing society in Mumbai is shortly going in for self redevelopment in the next 3-4 years.

The Society will be disbursing about ₹44,000 per month to each member for the next 3-4 years by way of rentals for alternative accommodation till our redeveloped flats are given back to the members. A few members like me staying at retirement homes have been paying ₹24,000 a month towards maintenance of the apartments and food expenses. Can you tell me how such rentals are to be treated from I-T view point?

V. N. Vasudevan

A. The amounts received by you during the time of re-development of your Mumbai apartment is in the nature of a hardship/rehabilitation allowance for which the developer is offering to pay for temporary accommodation until the redevelopment is complete. The amount so compensated is to be used entirely for a temporary accommodation, if the same is used partly or not used, the same will be taxable under the head “Income from Other Sources.”

Amounts paid by you as maintenance and food expenses in Coimbatore are not eligible to be set off against the amounts received by you at the time of redevelopment as you own the retirement home located in Coimbatore.

(The adviser is parnter, GSS and Associates, Chartered Accountants, Chennai)

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