Deduction of Investment in Residential House Property – Section 80C

Deduction of Investment in Residential House Property – Section 80C

“Sweet home” is the place that we remember when we are tired, stressed out and even when we are at the most beautiful place on the earth. No place can replace our home. A house becomes home when it is occupied by the people sharing a bond of love, a feeling of care for each other. We feel relaxed whenever we reach home. It is not in the fortune of everyone to own a house, but most of us do. Even, people who reside in a rented house decorate it as their own home and feel the same peace as we get to feel in a house owned by us.

Along with catering us with love and care, our owned house provide certain other benefits such as status in the society, relaxation from rent expenses and lot of other stuff. One of such benefit is provided by the Income Tax Act. The benefit is available under provisions of Income Tax Act whenever a person buys a house. Such benefit is available under section 80C of the Act on making investment in house property. Section 80C normally deals with the amounts allowed as exemption from the Gross Total Income calculated for tax purpose. Deduction under the said section generally consists of qualified expensed such as LIC.

Section 80C provides deduction of amount spent on buying house property. Such deduction is available subject to conditions provided in the section. Let us discuss few points to understand the availability of deduction in deep:

  • Any payments made for buying or constructing a new house property is available as a deduction u/s 80C subject to a limit of Rs. 1.50 Lacs available under section 80C along with other expenses available under the said section. It means that the deduction amount limit of Rs. 1.50 Lacs will also include other expenses such as LIC premium, Tuition Fees, PPF etc which are also eligible for the said deduction. The said limit was Rs. 1 lakh till the amendment was announced in the Financial Budget 2015. Thus, the increased limit will be applicable from Assessment Year 2015 – 16.
  • The following payments will hold good for availing deduction under section 80C in case of Investment in House Property:
    • Any amount due as an instalment or part payment to:
      • Self financing / other scheme run by any development authority, repayment to any housing board or authorities engaged in the management of construction and selling of house property on ownership basis; or
      • Any co – operative society or company with the capacity of being its member or shareholder, as a compensation for the house or any property allotted to the assessee. The same will not held good in case, the assessee is not a shareholder or member of the said company or co – operative society. It means, the deduction will not be allowed to the assessee on payment due to co –operative society or company against the cost of property if the assessee is not a shareholder or member of the same.

  • Any amount paid as repayment of amount borrowed from any one or more than one of the following authorities by the assessee:
    • Government being Central or State Government;
    • Bank, which may include a co-operative bank;
    • Life Insurance Corporation of India or say LIC of India;
    • National Housing Bank (NHB),
    • Public Company which is formed and registered in India and which is mainly established to provide financial services which are eligible for deduction under section 36(1)(vii) i.e. Long Term Financial assistance for construction or purchase of house in India in case the house are purchased / constructed for residential purpose,
    • Company in which substantial interest of public is attached or any co – operative society, provided that such company or co operative society is carrying out the business of providing financial assistance for purchase / construction of house,
    • Any authority or a board or corporation or any Government body i.e. any body established under Central or State legislature, being an employer of the assessee.
  • Any amount required to be paid on transfer of such property in the name of assessee being in the nature of stamp duty, registration fees and other allied expenses. Remember that the deduction may be revoked if it is found by the assessing officer that the expenses claimed by you where not in relation to the purchase / construction or house property or any transfer expense related to such property.
  • Along with the payments that qualify for deduction under Section 80C, there are certain payments made in relation to acquisition or construction of house property which do not qualify for deduction under section 80C. Such non-qualifying expenses are as follows:
    • Amount paid by a member or shareholder of a co – operative society or a company being in the nature of admission fees, cost of the share and / or initial deposit which is payable by the member or shareholder for earning the said capacity in the co – operative society or a company; or
    • Expenses incurred after receiving the completion certificate for the house property as a whole or any part of the house property from the government authorities who are proficient to issue such certificate or after the house property is self occupied or occupied for any other purpose or is let out then expenses made in relation to the said house property such as expenses for addition to construction, any alteration in the construction, renovation or repairing thereon, will not be eligible for deduction under section 80C.
    • The expenditures which are allowed as a deduction under section 24 will not be allowed as a deduction under section 80C. For example interest paid on borrowed fund for purchase or construction of house property.
  • Revocation of Deduction can also be made in case the time period for investment is not held. The section provides that in case where the house property is transferred before expiry of five years from the end of financial year in which the property was acquired or if any refund is received from expense made on acquiring such house property by any other name then the deduction availed by the assessee in previous year or years will be added back to his income. This will lead to withdrawal of exemption under section 80C in case of investment made on house property. Resultantly the taxable income of assessee will be increased and more tax will be attracted.

We have provided you with the benefits a whole new house can provide you along with the detailed discussion on amounts qualified for deduction, amounts not qualified for deduction, revocation of such deduction and other miscellaneous points. It is thus very simple to avail such benefit. Just keep in mind not to transfer such house property or receive refund in any manner of the amount expended on purchase or construction of such house property before the prescribed time limit and keep on enjoying the deduction under section 80C available on Investment made on House Property.

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