If the house is completed within the year and you take ownership of the house throughout the year, you can claim the interest paid for the entire year. Also, NPS contributions are eligible for a tax deduction under Section 80 CCD of the Income Tax Act, 1961
Question: I registered my apartment in March 2022. Am I eligible to claim a deduction of Rs. 2 lakh for interest paid on my home loan, comprised in equated monthly instalments (EMIs), while filing my income tax return? This is not pre-EMI. I am paying regular EMI, and the interest portion of my EMI exceeds Rs 2 lakh for the financial year 2021-22. I could not submit this to my office in February, as my house was yet not registered at that time.
Answer: Yes, you can claim the interest paid for the entire year, provided the house is completed during the year, and you have also taken possession of the house during the year. The date of registration of the documents is not relevant for this purpose. What is important is the date of completion of the house and possession, thereof. The amount of the claim would depend on whether the house is self-occupied, or is let out. If it is self-occupied, you will be able to claim interest on your home loan for up to Rs 2 lakh in a financial year, including one-fifth of the pre-EMI, if any. You can claim on the full interest paid, including the pre-EMI interest, if the house is let out, but you will not be entitled to claim set-off of loss under the head “Income from House Property” beyond Rs 2 lakh against other incomes. Do note that any loss remaining unabsorbed is allowed to be carried forward to be set off in subsequent years against house property income.
Question: Will an employee’s contribution to the New Pension Scheme (NPS) account also be included in the investment ceiling of Rs 1.5 lakh, or is it available separately?
Answer: The tax deduction for NPS contributions is available under Section 80 CCD of the Income Tax Act, 1961. Under section 80 CCD (1), the contribution of the taxpayer is eligible for deduction up to Rs. 1.50 lakh as per the limits laid down under Section 80 CCE, which also covers the various eligible items of sections 80C and 80 CCC. This deduction is subject to a restriction of contribution to the NPS account of up to 10 per cent of basic salary and dearness allowance for salaried individuals, while for others, it is capped at 20 per cent of the gross total income.
In addition to the deduction under Section 80CCD (1), Section 80 CCD (1B) allows for an additional and exclusive deduction of Rs 50,000 for contributions made to the NPS account over and above the limit of Rs 1.50 lakh. Moreover, the restriction of 10 per cent of salary or 20 per cent of gross total income is not applicable to contributions made under Section 80 CCD (1B).
Balwant Jain is a tax and investment expert.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)