Tax benefit on housing loan Interest and Principle

Tax benefit on housing loan Principle :-

1. Deduction available U/s 80C :

•  Under Sec. 80C of income tax Act, Maximum deduction allowed of Rs. 150,000/- in which Principle re-paid of housing loan included. 
• In other words, housing loan principle amount is the part of Sec. 80C like other deduction i.e. Life insurance, Investment in PPF, EPF, Sukanya samridhi account, tuition fees or etc.

Tax benefit on housing loan interest Sec. 24 :-

1. If House property self occupied by owner :-

• Assessee can claim deduction upto Rs. 200,000/- on interest on housing loan. if the owner or his family reside in the house property.
• Condition for claiming the deduction of Rs. 2 Lac.  

                               a. The home loan must be taken for purchase or construct a new property.

                               b. The loan must be taken after 1st April 1999.

                               c. The purchase or construction must be completed within 3 years from the end of the financial year in which loan was taken.

• If assessee fails to meet any of the above condition then deduction on interest limited to Rs. 30,000/-
• Deduction on home loan interest cannot be claimed when the house is under construction. It can be claimed only after the construction is finished. The period from borrowing money until construction of the house is completed is called pre-construction period. Interest paid during this time can be claimed as a tax deduction in five equal installments starting from the year in which the construction of the property is completed. 

2. If House property rented out :-

• Assessee can claim entire interest on the home loan allowed as deduction.

3. Deduction U/s 80EE :-

• Deduction of Rs. 50,000/- is available to individual assessee on housing loan interest, those are first time home buyers.
• For Complete information read "https://goo.gl/3Umzm1"

Section 80EE: Deduction on Housing loan interest

Sec. 80EE allows tax benefit to first time home buyer. Income tax deduction can be claimed on interest on home loan towards your first house property.

Eligible Assessee: Individual (resident or non-resident, both)

Eligible amount: Interest payable on loan taken from Financial Institution or housing finance co.
                                          or
                               Rs. 50,000/-                     Whichever is Lower

Relative Condition: 

• The loan has been sanctioned by the financial institution or housing finance company between 01.04.2016 to 31.03.2017.
• The amount of loan sanctioned does not exceed Rs. 35 Lakh
• The Purchase price of house does not exceed Rs. 50 Lakh
• The assessee does not own any residential property on the date of sanction of loan.

Important Point:

• This deduction is available for first time home buyer or assessee purchase his first house.
• This deduction is over and above the Rs. 2 Lakh in Sec. 24 of the income tax Act. 
• Deduction is available even if property under construction. Deduction is also available even if assessee has not received the possession or even if registry not taken in his name.
• Double deduction of same amount of interest, under any other provision of the Act, for any A.Y. is not permitted.

Illustration :

Mr. A has purchased his first house on 01.06.2016. cost of the house was Rs. 35 Lakh. He has borrowed the loan of Rs. 23 lakh on 25.05.2016 from state bank of India. During the P.Y. 2016-17, he paid the interest of Rs. 2,40,000/-. He used the house as his own residence.

Answer: -  Now for A.Y. 2017-18, deduction U/s  shall be Rs. 2 Lakh and deduction U/s 80EE shall be Rs. 40,000/-.

Section 80GG - Deduction in respects of rent paid

Eligible assessee:- 
                                Individual who is either self-employed or in the employment, but not receiving HRA or not provided any rent free accommodation.

Deduction under this Section as follows:-
Least of the following shall be allowed as deduction-

1. Rs. 5000/- P.M.
2. 25% of the total income; or
3. Rent paid - 10% of total income before allowing deduction U/s 80GG.

Relative conditions: Deduction under this section shall not be available to an assessee in any case where any residential accommodation is owned by the assessee self or by his spouse or minor child or HUF.

Assessee has to file a declaration of expenditure in form 10BA to claim the deduction.

Section 44ADA - Computing profit & gains of Profession on presumptive basis

Sec. 44ADA- A new section inserted  by finance act,2016. In this Sec. -

       -   An assessee being a resident in India,
       -   engaged in a Profession referred to in Sec. 44AA(1),
       -   whose total gross receipt do not exceeds fifty lakh rupees,
       -   the rate of computation of income is 50% of the total gross receipts,
       -   or the rate higher than the aforesaid (50%) rate
       -   shall be deemed to be the profit and gain of such profession to tax under the head PGBP.

Important Point : -

• No deduction allowed Under section 30 to 38.
• No required to maintain books of accounts U/s 44AA.
• No required to get tax audit U/s 44AB.
• Not required to deposit advance tax in installment, Whole amount pay on or before 15th March

Profession referred to in Sec. 44AA(1):- A person resident in India engaged in following profession can take advantage of presumptive taxation scheme:-

• Legal
• Medical
• Engineering and architectural
• Accountancy 
• Technical consultancy
• Interior decoration
• Any other profession as notified by CBDT

Section 44AD - Computing Profit & gains of Business on presumptive basis

First we read two important explanation :-

      1.  "Eligible assessee" means -

• an individual, HUF or a Partnership firm, who is a resident, but does not include a LLP firm and;
• Who has not claim deduction under any of section 10AA or deduction U/s 80IA-80RRB.

      2. "Eligible Business" means -

• Any business except the business of plying, hiring or leasing goods carriages referred to Sec. 44AE  and;
• Whose total turnover or gross receipt does not exceed two Crore rupees.

Sec. 44AD(1) :- 

• If an eligible assessee carried on eligible business willing to opt presumptive basis scheme, the rate of computation of income is 8% of total turnover or gross receipts of such business;
• or a rate higher then the aforesaid rate (i.e 8%) claimed to have been earned by the eligible assessee;
• shall be deemed to be the income under the head "Profit and gain of business".

Important Points-

        1. This provision shall not apply to- 

• A person carrying on profession as referred in Sec. 44AA;
• A person earning income in the nature of commission or brokerage; or
• A person carrying on any agency business.

      2. If an assessee declares income as per Sec. 44AD(1)-

• Deduction U/s 30 to 38 are not allowed;
• Not required to maintain books of account as per Sec. 44AA;
• Not required to get tax audit U/s 44AB.
• Assessee don't have to pay advance tax in installment, but assessee have to pay 100% advance tax on 15th March of that particular F.Y.

     3. An additional condition has been added, If assessee opting for the presumptive scheme-

• File presumptive scheme for at least 5 years in continuation
• If assessee decide to show and file profits as regular business before the end of these 5 years, you will lose presumptive taxation for the subsequent 5 years.