A. Tax Deduction towards principal repayment:
The maximum limit of repayment of housing loan qualifying for deduction under Section 80C of the Income Tax Act is Rs.1,50,000/- (including Stamp Duty, Registration Fee incurred for the purpose of transfer of such residential house property).
This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made, provided that the assesse does not transfer the house property on which he has claimed tax deduction under Section 80C, before the expiry of 5 years from the end of the Financial Year in which the possession has been obtained by him.
B. Tax benefits on the Interest component of home loan:
The conditions for the 80EE deduction are as follows:
Common requirements between the two Sections:
Differences between these two Sections:
|Section 54||Section 54F|
|To claim full exemption, the entire capital gains have to be invested.||To claim full exemption, the entire sale receipts have to be invested.|
|In case entire capital gains are not invested, the amount not invested is charged to tax as long-term capital gains.||In case entire sale receipts are not invested, the exemption is allowed proportionately. [Exemption = Cost of the new house x Capital Gains/Sale Receipts] You should not own more than one residential house at the time of sale of the original asset.|
|This exemption will be reversed, if you sell this new property within 3 years of purchase and capital gains from sale of the new property will be taxed as short-termcapital gains.||This exemption will be reversed, if you sell this new property within 3 years of its purchase or construction OR if you purchase another residential house within 2 years of the sale of the original asset or construct a residential house, other than the new house within 3 years of the sale of the original asset. Capital gains from the sale will be taxed as long-term capital gains.|
If the cost of the new residential property is lower than the total sale amount, then the exemption is allowed proportionately. For the remaining amount, you can reinvest the money under Section 54EC within 6 months.