This ceiling limit is applicable only if the property is self-occupied. If the property were let, the deduction in respect of interest can be claimed against rental income without any ceiling limit.

The reader cannot claim that rebate should be available to him in respect of the sum for which his wife has not been entitled to the rebate, because the repayment exceeds the limit set out in Section 88.

B: If a self-occupied property is co-owned, there seems to be no prohibition on each of the co-owners claiming the deduction subject to the above limits.

The same will be the position in respect of rebate under Section 88, with each of the co-owners entitled to the rebate for the principal repayment of the housing loan, provided such housing loan is taken from a specified bank or institution.

C: The same will apply if the father takes the loan. The son cannot claim rebate and deduction in respect of interest unless the income from the property is assessable in the hands of the son.

D: The Board has vide Circular No.28 dated August 20, 1969 clarified that interest on a fresh loan taken to repay the original loan will qualify for deduction if the second borrowing has been used merely for repaying the original loan. This Board Circular has also been given statutory recognition by the Finance Act, 2002.

E: Interest on loan borrowed for repairs, renewals or reconstruction will not qualify for the enhanced deduction of Rs1.50 lakh if the property is self-occupied.

This enhanced deduction is available only if the borrowal is for purchase or construction of a house property.

F: For claiming interest as a deduction under Section 24, it is not required that the loan should have been taken from any specified institution. However, for claiming rebate under Section 88, the repayment should be in respect of an amount borrowed from:

The Central or any State Government.

Any bank, including a co-operative bank.

The Life Insurance Corporation.

National Housing Bank

A Public Company registered in India providing long-term finance for housing and qualifying for deduction under Section 36(1)(viii).

A company in which the public are substantially interested, or any Co-operative society engaged in financing for construction of houses.

An assessee's employer where the employer is a public company, public sector company, university, college affiliated to such university, local authority or a co-operative society.

G: Interest on the loan paid up to the previous year immediately preceding the year in which the property is purchased or constructed, can be claimed in five equal instalments commencing from the previous year in which the purchase or construction is completed. This, however, will be subject to the ceiling limit if the property is self-occupied.

H: If a property cannot actually be occupied by the owner because of his employment being at any other place, and he has to reside in that other place, the annual value of the property may be taken as nil. However, only one property owned by an assessee can be taken as self-occupied. Interest can be claimed as a deduction in respect of this property subject to the ceiling limits applicable to a self-occupied house property. In respect of the rent paid by the reader, exemption can be claimed under Section 10(13A). This exemption is available to the extent of the least of the following:

I: If the individual's parents live in a property owned by the assessee, with the individual living in rented property, it is felt that the property should be treated as self-occupied, provided no benefit is derived by the individual from his parents in respect of the property.

J: Section 24 allows a deduction in computing income from house property in respect of any interest payable on capital if the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital.

Construction of a house property would necessarily mean that land needs to be acquired.

Therefore, it is felt that the deduction in respect of interest should be available in respect of the loan taken for purchase of the land as well.

Reference in this connection may be made to Circular No. 667 dated October 18, 1993 in the context of Section 54/54F where the Board had clarified that for computing the exemption under the Sections, the amount paid towards purchase of a plot and also towards construction of residential house thereon will qualify for the exemption.

Queries

: I propose to buy a second hand house for Rs15 lakh. This includes the cost of plot and also the building. If a loan is taken jointly by me and my wife for purchase of the property, will both of us be entitled for the deduction under Section 24 in respect of interest on housing loan, and for the rebate under Section 88 for the principal repayment of the housing loan?

The principal repayment of my wife in respect of the housing loan will not qualify for the rebate under Section 88 as the same will be in excess of the limits prescribed. Can I use this excess of principal repayment to claim rebate under Section 88 in my hands?

Naveen Prakash

: One of the earlier articles mentioned that if there is co-owned property, each co-owner would be entitled to the deduction under Section 24, subject to the ceiling limits applicable to each such co-owner. I consulted my auditors who refuse to accept this view. Kindly clarify the basis for such a view.

Krishnakumar

: If a housing loan is taken by the father, the loan having been sanctioned on the basis of the son's salary, can the son claim the tax rebate and the deduction in respect of the interest?

S. Ramamurthy

: If a fresh loan is taken to repay an existing loan, taken for construction of a house, can the interest on this fresh loan be claimed as a deduction?

R. Subrahmanyan

: Will interest on loan taken for repairs, renewals or reconstruction also qualify for the enhanced deduction of Rs1.50 lakhs?

A. L. Sivasankar

: For claiming deduction under Section 24 under the head, `income from house property', is it required that the interest should be payable on a loan taken from an approved financial institution? What would be the position for the rebate under Section 88?

A. S. Panchapakesan

: I have started repaying the housing loan I took. However, there is some delay in completing the flat. Can the interest paid by me be claimed as a deduction even in respect of the period prior to the completion of construction?

Gerard

: Where a house property is situated in a place other than the place where the assessee is employed, can the income from such property be taken as `nil'? How is the deduction to be claimed in respect of interest in such cases? If I live in the place of my employment in a rented premises, can I also claim the exemption under Section10(13A) for HRA in computing salary income?

P. Babu

K. Shitiz Varma

: What would be the position if, in the above case, the parents of the individual live in the property owned by the assessee and where no rent is charged, the parents being dependent on the assessee's son? Would the conditions change if the son has not moved out due to his employment in another place but for other personal reasons?

T. N. Shah

Anonymous

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