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Am I eligible for deduction on home loan interest paid while constructing a house?

To claim the deduction on the interest paid on home loan taken for constructing a house, there are some conditions to be satisfied.

Jul 29, 2019, 11.38 AM IST
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The maximum deduction on home loan interest is Rs 2 lakh, if a house is self-occupied.
I am constructing a new house and have availed of a bank loan. Will I be eligible for income tax deduction on my home loan interest outgo on this second house?

Shubham Agrawal, Senior Taxation Advisor, TaxFile.in replies, "You will be eligible for a deduction on the interest outgo on this house, provided the construction is completed within five years from the end of the financial year in which you took the home loan. The deduction can be availed starting the year in which the construction of the house is completed. The interest for the period during which the house was under construction can be availed in five equal instalments after the construction is completed. The maximum deduction on home loan interest is Rs 2 lakh, if a house is self-occupied. If it is let out, there is no specified upper limit on interest deduction. However, the overall loss one can claim under the head ‘house property’ is restricted to Rs 2 lakh only."

My NRI son owns two houses and I get the rent in my account on his behalf. Will I have to include this in my income, or will he have to file a tax return to show this income? What’s the process for an NRI to pay tax in India?

Archit Gupta, CEO, ClearTax replies, "The owner of the house has to report the rental income. So, your son will have to report this income. NRIs are required to file income tax return in India, if their annual taxable income in India crosses Rs 2.5 lakh. The return has to be filed through form ITR-2. Your son can claim deduction for municipal taxes paid to arrive at his net taxable rental income. From the net rental income, your son can claim a flat 30% standard deduction. It is important to note that Indian tenants paying rents to NRIs are required to deduct tax at source at 31.2%."
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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