home loan tax rebate for possession beyond 3 yrs of loan disbursement

POSTED BY cawshic ON June 8, 2012 4:25 pm COMMENTS (3)

I have found on the internet a article saying that for a home loan repayment, to be eligible for tax rebate, the possession should be within 3 financial years from the loan disbursement. And that I can take tax benefit on the intrest submitted in these 3 years over the next 5 years after taking possesion (20% of the intrest amount every year, subject to a maximum of 1.5 Lakhs).
The builder is promising a possession in 48 Months (4 years) plus a grace period of 6 months. If he fails to deliver before that then a penalty clause will be applicable.

My questions:

First, If the builder is saying that possession will happen in more than 4 years after booking (practically saying it will happen close to 5 years from now, i will get a possession certificate from builder only after 5 years) , will my home loan be eligible for a Income Tax rebate under the provision of loss of income from house?

Secondly I have also been informed that if the home loan is for a second house then the total intrest on the second home loan (irrespective of the 1.5 lakh cap) will be eligible for the Tax Rebate, but a notional rent on the 1st house will be assumed as income and my net taxable income will be calculated accordingly. Is this assumption / information correct?

Please advise.

3 replies on this article “home loan tax rebate for possession beyond 3 yrs of loan disbursement”

  1. cawshic@rediffmail.com says:

    Dear Ashal,

    Thanks for your informative feedback.

    As a corollary, based on your answer, what would you recommend in such a scenario. I am a end user and not a Investor.

    Appreciation of property will not mean much to me, as I intend to stay in the home. The loan amount involved will be close to 45 lakhs, hence initially the intrest repayment for the first 2 years will be to the tune of 4.5 lakhs approximately. Meaning the tax benefit of about 1.3 lakhs will be lost if the loan is not eligible for a tax benefit. Advise.

    1. Dear Cawshic, If you intend to use the property for self consumption & also the tax benefit, my take ‘ll be to drop the current property & go for a ready to move in kind or where the possession ‘ll be available in next 3-6 months. Even do not go for projects where you ‘ll be promised for possession in 12-18 months.

      That’s my take, you are free to accept or reject it.



  2. Dear cawshic, Sorry to say but for the given situation that the possession ‘ll happen after 4 or 5 years (even beyond that), no income tax benefit on the interest can be availed by you. It’s immaterial that it’s 1st house or 2nd house as no benefit is there for possession after 3Y.

    In general, if you are claiming 1st house as self occupied & 2nd house’s possession is also with you, all the interest paid on 2nd home loan ‘ll be available for tax benefit but the notional or actual rent of 2nd house ‘ll be considered in the calculation of income from house property.



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