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December 22, 2016

How to claim both HRA, Home loans tax deductions with section 24 and 80C, With Automatic One by One preparation Excel Based Form 16 Part B for F.Y.2016-17

The income tax year 2016-17 end is nearing. All individuals are busy planning how to minimize their taxes. One important component used by many salaried people is HRA and home loan deductions under section 80C, section 24.
I have listed out the possible scenarios one comes across when availing HRA exemption and home loan deductions under section 80C, section 24.
Everybody plans to buy a home due to ever increasing reality prices and the Indian dream of owning his own home. But many do not properly avail or use income tax benefits or are a bit confused about it.

Download Automatic Income Tax Form 16 PartB ( One by One Preparation) Excel Based Software for F.Y.2016-17. [ This Excel utility can prepare automatic Form 16 Part B ( One by One ) with all amended Tax Section As per the Finance Bill 2016-17]


HRA, Home Loan deductions under section 80C, section24

Now that we have started, let us see the various scenarios usually faced by our readers. These have been taken from emails received but names have been changed. One should remember that to avail interest deduction under section 24 below 3 conditions must be satisfied.
§                  Loan must be availed after 1st April 1999.
§                  The possession is taken within 3 years from the end of financial year in which loan was taken.
§                  Interest certificate is available from the lender.

Section 24, Section 80C – Points to remember:

1.            Please note that the maximum claim under 80C section is Rs 1.5 lakhs inclusive of tuition fee, insurance, PPF, ELSS, NSC etc.,
2.            Rs 2,00,000 is maximum under section 24 B for self-occupied house from AY 2016-17.
3.            Houses under construction are not eligible for deduction under section 24. However principal repaid is eligible for deduction under section 80C.
4.            If you buy a house and it is not completed in 3 years, Then, in that case, the maximum deduction is only Rs 30,000 per year for self-occupied houses. Assume you buy a home in June 2015. It is completed in Jan 2019, then interest maximum exempted is Rs 30,000 only per year. However, there is no limit of this 30,000 deduction if the house is let out.

5.            When availing pre-completion interest deduction as in scenario 5, remember that if it is self-occupied property then the Rs 2,00,000 maximum limit is inclusive of Rs 80,000+interest paid for that year. For let out, the interest deduction claimed can be above Rs 2,00,000.
6.            Processing fee can be claimed as a deduction under section 24 B in a year of purchase. Typically processing fee of home loan is 1% of loan amount ie., for Rs 30 lakh loan processing fee will be Rs 30,000 and can be claimed under section 24B deduction.This also applies to houses purchased before 1st April 1999.
7.            Section 24 is on an accrual basis and section 80C is on payment basis. That is, even if interest is not actually paid it can be claimed in a financial year under section 24 but for section 80C the actual principal must have been repaid for claiming a deduction.
Remember that buying a home is a prudent decision but availing tax benefits is even more important to grow wealth faster.
You can also deduct 30% of your Net Rentals if a house is let out under Section24 and use section 80EE to benefit Rs 1,00,000 if you’re a budget first time home buyer. But that is for a separate post.
The government has made available these deductions under section 24 and section 80C to encourage buying homes.

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