Re­vok­ing home loan tax de­duc­tions

HT Estates - - FRONT PAGE - Ash­wini Ku­mar Sharma ash­

There are var­i­ous in­come tax sec­tions un­der which you can claim de­duc­tions for ex­penses and in­vest­ment in­curred by you dur­ing the rel­e­vant fi­nan­cial years. Such de­duc­tions help you to bring down­thetax­ablein­come for the re­spec­tive fis­cal and con­se­quently re­duce your tax li­a­bil­ity.How­ever, in many cases, a lock- in pe­riod is spec­i­fied— un­der the sec­tion of the Act as well as the in­stru­ment against which you may have claimed a de­duc­tion. If you fail to ob­serve the lock-in pe­riod, the de­duc­tions that you availed can be re­voked.

Let’s read more about the lock-in pe­ri­ods that need to be ob­served in case you have claimed de­duc­tion against re­pay­ment of home loan prin­ci­pal amount.


While there is no lock-in pe­riod for de­duc­tion claimed against in­ter­est pay­ment on home loan un­der sec­tion 24(b) or 80EE, the sec­tion 80C(5) (re­lat­ing to re­pay­ment of prin­ci­pal) of the Act stip­u­lates that if you sell your house within 5 years from pur­chase or date of pos­ses­sion, the de­duc­tion claimed on prin­ci­pal re­pay­ment dur­ing pre­vi­ous years gets re­voked. In this case, all the de­duc­tions claimed for home loan prin­ci­pal re­pay­ment un­der sec­tion 80C dur­ing the pre­vi­ous years too have to be clubbed to­gether and added to in­come of the year of sale, and be taxed ac­cord­ingly.

Let us as­sume you had bought a house in May 2014 with a home loan, and had claimed about Rs4 lakh un­der sec­tion 80C over the last 3 fi­nan­cial years—FY2014-15 to FY2016-17. If you sell the house now, the en­tire Rs4 lakh claimed ear­lier as de­duc­tion un­der sec­tion 80C will get added to your in­come for FY2017-18 and you will have to pay tax on the to­tal in­come as per the in­come tax slab ap­pli­ca­ble to you.

Apart from home loan prin­ci­pal amount, the stamp duty and reg­is­tra­tion fee paid for reg­is­tra­tion of prop­erty also qual­ify for de­duc­tion un­der sec­tion 80C in the year of pur­chase. If you had claimed stam­p­dutyan­dreg­is­tra­tion fee as de­duc­tion, you need to ob­serve the 5-year lock-in in these cases too. If the prop­erty is sold be­fore 5 years, the de­duc­tions claimed against stam­p­duty and reg­is­tra­tion fee will get re­voked and get added to the in­come of the year of sale and tax ac­cord­ingly.

So, be­fore you de­cide to sell your house, keep the lock-in cri­te­ria in mind. Else, your tax li­a­bil­ity may­in­crease con­sid­er­ably in the year of sale.


De­duc­tions help you to bring down the tax­able in­come

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