The limit on the amount that can be claimed as interest on home loan deduction has been increased to Rs 2,00,000 from financial year 2014-15. As we have seen https://blog.cleartax.in/interest-on-home-loan-benefit-fy-2014-15/ this can bring you significant tax savings. Let’s understand what are the steps you need to take to claim this deduction –
Step 1 Documents you will need
- Ownership details of the property – Goes without saying that you must be an owner in the property to claim this deduction. In case you are a co-owner in the property find out your share in the property. The amount of deduction you can claim is based on your share in the property.
- Completion of construction or date of purchase of the property – the deduction for interest can be claimed starting the year in which the construction of the property is completed. You can also claim pre-construction interest. Pre-construction interest is allowed in 5 equal installments starting from the year in which the house is purchased or the construction is completed.
- Borrower Details – Just like ownership, the home loan must be in your name too to claim this deduction. You may also be a co-borrower in the loan.
- A certificate from the bank which has your interest and principal details.
- Municipal taxes paid during the year. Note that municipal taxes can be deducted from House Property Income only when these have been actually paid during the year.
Step 2 Submit these documents to your Employer
- If you submit your interest on home loan deduction documents to your employer, your employer will adjust your TDS deductions accordingly. Therefore, you won’t have to wait until the year end to find out your tax liability and adjust your tax. Do make it a point to inform your employer.
- If you are a Freelancer or you are self employed – you don’t need to submit these documents anywhere, however you will need these documents to estimate your Advance Tax liability for each quarter.
- You are not required to submit these documents to the Income Tax Department.
Step 3 Calculation of Income from House Property
In case of a self occupied house property, the amount of deduction is limited to Rs 2,00,000. However for a let out house property there is no limit on the amount of interest you can claim as deduction.
Here are the steps to calculate your income from House Property.
Gross Value of the property (nil in case of Self Occupied Property and Rental Value if rented)
Less: Municipal Taxes actually paid
Less: Standard Deduction (30% of Net Annual Value= Gross Value less municipal taxes)
Less: Deduction for interest on home loan
= Income from House Property.
Do note that when you file your return with https://cleartax.in/, you DON’T have to do any of these calculations – you only need to enter your details and we will automatically calculate the amount which will be your https://cleartax.in/Meta/CharteredAccountant.
Step 4 Claim your Principal Repayment under section 80C – In case there is Principal Repayment by you during the year (check your loan installment details) – principal repayments are allowed to be claimed as a deduction under section 80 C. However, the total amount allowed to be claimed under section 80C is capped at Rs 1,50,000.
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