Financial Daily from THE HINDU group of publications
Sunday, Jan 01, 2006
Financial Daily from THE HINDU group of publications Sunday, Jan 01, 2006 |
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Investment World
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Income Tax Columns - Tax Talk Doubt over benefit T. Banusekar
I HAVE taken a housing loan and the EMI on it is being paid from May 2005. The house will be handed over to me only in March 2006. Will I be able to claim tax benefits in respect of the principal and interest in the financial year 2005-06? Shashikant Reply The principal repayment of the housing loan can be claimed as a deduction under Section 80C in financial year 2005-06, that is, in assessment year 2006-07. This is because Section 80C provides for deduction in respect of certain investments and payments in the year in which the investment is made or, as the case may be, the payment is made. The interest can also be claimed under Section 24 as a deduction in the financial year 2005-06, that is, in assessment year 2006-07. Under Section 24, it is only the pre-construction period interest which is not allowed in the year in which it becomes due but is allowed in five equal annual instalments beginning from the year in which the purchase or construction is complete. Pre-construction period interest will be such interest which becomes payable until the end of the previous year immediately preceding the previous year in which the purchase/construction is complete. The interest of the year in which the purchase/construction is completed is not treated as pre-construction period interest. In your case, since the construction will be completed in March 2006, the interest of the financial year 2005-06 will not be treated as pre-construction period interest and will qualify for deduction in full in the same financial year.
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