The Hindu Business Line : Tax-free renovation

I HAVE taken a housing loan of Rs 10 lakh from ICICI Home Finance. This loan was taken for purchase of the house. I have taken a further loan from a housing finance company of Rs 6 lakh for renovation of the house. Will the interest on Rs 6 lakh taken for renovation also qualify for deduction?

Pravin Patil

Reply

The interest on the sum of Rs 6 lakh will also qualify for deduction under Section 24 in computing the income from house property. Section 24 allows a deduction in respect of interest on loan taken for purchase, construction, repairs, renewals or reconstruction of up to Rs 1,50,000 if the loan is taken on or after April 1,1999 and if the purchase or construction is completed within 3 years from the end of the financial year in which the loan is taken.

The deduction will, however, be restricted to a maximum of Rs 30,000 if the above conditions are not satisfied.

You may, therefore, note that interest on loans taken for renovation will not qualify for a higher deduction of up to Rs 1,50,000 but will qualify only for a maximum deduction of Rs 30,000. You may also note that the maximum deduction that is allowable in respect of interest on loan taken for purchase, construction, repairs, renewals or reconstruction cannot exceed Rs 1,50,000 in the aggregate.

This will apply if the property is self-occupied. On the other hand if it is let out, the interest on capital borrowed for purchase, construction, repairs, renewals or reconstruction will be allowed as a deduction without any ceiling.

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