Tax Deduction On Interest Makes Home Loan Cheaper

Ashish Gupta outlines some of the conditions andfinancial year. The interest on a loan taken for repair or
provisions that make you eligible for a tax deduction onreconstruction also qualifies for this deduction.
the home loan interest you payFor the purpose of computing income or loss under
Under the Income Tax Act, interest paid on a homethe head 'Income from House Property' for a
loan is deductible from your total income, provided theself-occupied house, a deduction of Rs 30,000 is
conditions specified are complied with. The deductionsallowed on interest on borrowed capital. However, a
are available while computing your income under thededuction on account of interest up to a maximum limit
Head 'Income from House Property'. The deduction onof Rs 1.5 lakhs is available if the loan has been taken
interest paid is available even if the house is not rentedon or after 1.4.1999 to construct or acquiring a house,
out, and is either vacant or self occupied. The loan canand the construction or acquisition of the house has
be for construction, acquisition, repair or reconstructionbeen completed within three years from the end of
of property.the financial year in which the amount was borrowed.
The main condition is that you should acquire propertyThere is no stipulation regarding the date of
on borrowed money, and the interest should becommencement of construction. Consequently, the
payable on the borrowed capital. Interest paid on aconstruction of the house could have commenced
home loan is allowed as a deduction on accrual basisbefore 1.4.1999 but, as long as it is completed within
i.e. on due basis. It need not have been actually paidthree years, from the end of the financial year in which
during the year.capital was borrowed the higher deduction would be
The deduction on home loan interest paid can beavailable on capital borrowed after 1.4.1999.
claimed subject to an upper limit of Rs 1.5 lakhs in a