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Thread: Income tax exemption for having availed house building advance

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    Junior Member vishalbalaji is on a distinguished road
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    Post Income tax exemption for having availed house building advance

    Sir,

    i have availed house building advance in the year of 2004 and recovery of principal amount is being deducted from march, 2008 onwards. My question is whether the accrual interest for having availed house building advance may be allowed for getting exemption other than 1 lakh savings under chapter iv. If yes, please explain how to calculate the accrual interest on house building advance.

    V. Balaji, sro, epfo, salem.

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    Senior Member RKPATHAK is an unknown quantity at this point
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    Yes it qualify

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    Senior Member tvenkatam is on a distinguished road
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    Quote Originally Posted by vishalbalaji View Post
    Sir,

    i have availed house building advance in the year of 2004 and recovery of principal amount is being deducted from march, 2008 onwards. My question is whether the accrual interest for having availed house building advance may be allowed for getting exemption other than 1 lakh savings under chapter iv. If yes, please explain how to calculate the accrual interest on house building advance.

    V. Balaji, sro, epfo, salem.
    Dear Friend,

    According to you only the principal of HBA is being repaid by you currently. You are eligible for rebate under section 80 C subject to the maximum limit of ` one lakh. The question of exemption on the interest component of HBA will arise only when the repayment of interest commences.

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    Senior Member SASI is on a distinguished road
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    Quote Originally Posted by vishalbalaji View Post
    Sir,

    i have availed house building advance in the year of 2004 and recovery of principal amount is being deducted from march, 2008 onwards. My question is whether the accrual interest for having availed house building advance may be allowed for getting exemption other than 1 lakh savings under chapter iv. If yes, please explain how to calculate the accrual interest on house building advance.

    V. Balaji, sro, epfo, salem.
    You can claim interest deduction on accrual basis. Interest due for one year can be claimed in that year even before the repayment of interest. Interest due for pre-construction period can either be claimed in the respective years or can be claimed in 5 years starting from the year of completion of house. This is in addition to Rs.100000/- allowed under section 80C. The maximum amount of deduction under interest for one year is Rs.150000/-

    SASI

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    Member gokul1969
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    Exemption for interest on accrual basis can be claimed as per Income Tax Act. But if exemption is now claimed, it should be claimed at the time of actual payment of interest. You can refer to Swamys Hand Book to calculate the interest on HBA.
    Regards
    Pradheep

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    Junior Member vishalbalaji is on a distinguished road
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    sir, please confirm onceagain that the accrual interest canbe shown apart from 1 lakhs savings under section 80c.

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    Senior Member SASI is on a distinguished road
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    Interest on HBA is taken as minus under income from house property and its maximum limit is Rs.150000/- .
    Rs.100000 limit is for deductions under Section 80.
    These are different deductions. Form ITR I will clear the doubt. http://law.incometaxindia.gov.in/DIT...L-II-ITR-1.pdf

    On accrual basis calculation of interest on HBA Section 24 of the IT ACT says

    “Explanation.- Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years.”

    http://www.incometaxindia.gov.in/act...x%20act/24.asp

    sasi

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    Senior Member tvenkatam is on a distinguished road
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    Dear friend,

    Under Section 24(b) the interest component of HBA repayable subject to a maximum of 150000 per annum is eligible for deduction only after the repayment is made. Interest payable during previous years but paid during the current year is also eligible for deduction against the income for the corresponding previous five years if the assessee so desires. You can not, however, seek exemption on interest accrued on HBA during the current year or past years on anticipated repayments to be made in future years.

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    Senior Member SASI is on a distinguished road
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    Dear sir,

    "24.Deductions from income from house property.
    Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:-
    (a) a sum equal to thirty per cent. of the annual value;
    (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital".

    24 b refers to interest payable and not interest paid. In the case of HBA the recovery of interest begins after about 15 years and Income Tax Department allows the deductions on interest from the date of receipt of HBA on accrual basis.

    sasi

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