How Can I reduce my tax liability by availing home loan?

This is the basic question every tax payer has in his mind but no definite anwer. Here we will discuss about how we can bring down our tax liability without breaking any law of land. Yes it can be done legally. Every body of you must have heard about the home loan benefits given by the government and most of you must be availing the housing loan benefit of self occupied house up to Rs. 200000/-.

Now we will discuss about the benefit of same home loan by giving that house on rent. If that house is given on rent then there is no limit of claiming interest on housing loan as prescribed for self occupied house. We can understand this by an example given below: –


House Loan of Rs. 10000000/- for a period of 20 years @ 9.50% (having an emi of Rs. 93213/-)

for 1st Year total amount paid towards emi will be Rs. 1118556/- out of which Rs. 942463/- will be towards interest and Rs. 176093/- will be towards repayment of principal.

Case 1

House is being self occupied then

total tax benefit would be Rs. 200000/- as amount of interest on housing loan allowed as deduction towards self occupied house under section (u/s) 24 of the Income Tax Act, 1961.


Case 2

House given on rent of Rs. 18000/- then calculation of tax benefit would be as follows: –

Gross Rent Received (18000X12) (A)                216000

Less: – House Tax Paid (B)                                        Nil

Gross Annual Value (A-B)=C                              216000

Less: – Deduction towards repair and

maintenence @ 30% of Gross Annual Value     64800

(30% of C) D

Net Annual Value (C-D)= E                                  151200

Less: – Interest on Housing Loan                         942463

Income From House Property                            -791263**

**This amount is adjustable against salary or any other income the assessee is having.




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