Condition for Deduction of Interest on Home loan
Posted @ January 21, 2016, 7:20 am under (Payroll Outsourcing & Taxation)
CBDT CIRCULAR NO : 20/2015 Dated the 2nd December, 2015 lays down following conditions for Deduction of Interest on Borrowed Capital for Computation of Income from House Property [Section 24(b)] by an employer:
The deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence.
However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
The quantum of deduction allowed is Rs. 2,00,000/- (w. e. f. AY 2015-16)
The acquisition or construction of the house should be completed within 3 years from the end of the FY in which the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.
Thus employer can take into account deduction of interest on housing loan for only one self occupied property, while computing the taxable income of an employee.