Reversal of 80C benefits on Home Loan

POSTED BY Prasad Kulkarni ON July 15, 2012 1:03 pm COMMENTS (4)

I sold my house (on 31-Mar-2012 i.e. in FY 2011-12) after 3 years but before 5 years. I had taken a home loan on the property and availed 80C benefits during the last three years on the principal payment of the home loan. I closed my loan before selling the property.
I purchased another property (costing more than Rs. 30 lacks) on 30-Apr-2012 i.e. in FY 2012-13. I am aware of all the income tax rules related to capital gains.

As per the information I have, my 80C benefits will be reversed because I have sold the property before 5 years. So my questions are:
1. Is this rule still applicable in the AY 2012-13 and if yes, is there a way to avoid this tax?

2. If the loan is closed before selling the property then also is this tax applcable? (just a guess as my C.A. has advised me that this tax is not required to be paid)

3. As per my information, if you are buying a property costing more than Rs.30 lacks, then it is to be declared to IT department by filling certain form. Is this information still valid. If yes, can I please get the details about the form, how/where should it be submitted, is the price limit for this declaration revised etc.?

Following the forum instructions, I have serached all the existing relevant questions and convinced that I have to pay this tax.

Usually, I file my ITR online but this time I thought that since it is bit complicated (involves multiple property transactions) I decided to do it through a C.A.
He told me that I will not have to pay such tax (reversal of 80C benefits) and also any such form (as per my question 3) is not required to be submitted to IT department.

I am confused now. Can anybody on the forum please help me and possibly send me a link which mentions these rules so that I can forward this to my C.A.

Thanks a million.

4 replies on this article “Reversal of 80C benefits on Home Loan”

  1. Dear Prasad, the section 80C wording clearly indicates that in case of sell of property before completion of 5Y, the home loan principal repayment benefit ‘ll be reversed. so you should pay your tax now.

    Regarding the above 30L value property transaction, no form is there for reporting purpose. The registrar of property had already reported it to Income Tax office.



    1. Prasad Kulkarni says:

      Dear Ashal,

      Thanks a lot for your valuable advice.
      Further to this query, I would like to ask that while paying the tax, I have to pay the saved tax or add the total principal amount on which the tax is saved till date to my this years income and then calculate the tax for this year.

      Because if I add the principal amount on which the tax is saved till date then it changes my tax bracket.

      Kindly advice.

      1. Prasad Kulkarni says:

        Dear Ashal,

        One more doubt (I am sorry for too many doubts), whether tax saved u/s 80C on stamp duty and registration charges has also to be reversed or only on the principal payment.

        I am gathering so much information as I have taken calculating and filing tax into my own hands.

        Thanks and Best Regards,

        1. Dear Prasad, there is nothing wrong is you are asking too many questions. Regarding the tax reversal, only the tax saved against Principal repayment (not the principal amount) ‘ll be added back to your income.

          The tax saved from Stamp duty as well as Registration charges is exclusive of home loan, hence the benefit claim against this amount ‘ll remain intact.

          No nreason to worry.



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