Here are 4 steps to claim interest on your home loan deduction-
The limit on the amount that you can claim as interest on your home loan deduction has been increased to Rs 2,00,000 from the financial year 2014-15. As we have seen here, this can bring 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 – It goes without saying that you must be an owner of the property to claim this deduction. In case, if you are a co-owner in the property find out your share. 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 to start 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 claim 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 a 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 a deduction.But as per budget 2017, from FY 2017-18 onwards, the deduction for home loan interest on let out property is also limited to the extent to which loss of such house property does not exceed Rs 2 lakhs.
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 ClearTax, 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 Income from House Property.
Step 4: Claim Interest on Home Loan Deduction and 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 claim interest on home loan deduction under section 80 C. However, the total amount allowed to be claimed under section 80C is capped at Rs 1,50,000.