Deduction of Interest on Home Loan – Sec 24b

Section 24 of the income tax act provides a deduction in respect of home loan interest.
Some of the important points
1) Interest on home loans is allowable as a deduction on an accumulation basis not on paid basis (even if account books are held in reserve on cash basis) if capital is on loan for the reason of purchase, construction, repair, renewal or rebuilding of the house property. The deduction can be claimed for two or more home loans.
2) Interest includes service fees, brokerage, commission, prepayment charges etc.
3) Interest/penalty on unpaid interest shall not be allowed as deduction.
4) Deduction shall be allowable irrespective of the nature of loan, whether it is a home loan or personal loan from any person/institution.
5) If a person as an alternative of raising a loan from a third party pays the sale price to the seller in installments all along with interest than such interest is also allowable.
6) Interest on borrowed money which is payable outside India shall not be allowed as deduction under section 24(b), unless the tax on the same has been paid or deducted at source and in respect of which there is no person in India, who may be treated as an agent of the recipient for such purpose.
7) For claiming deduction under this section, the assessee must be the owner or deemed owner of the home property and the loan shall be in the assessee name.
Deduction in case of Co-borrower
If the home loan is taken on joint names then the deduction is allowed to each co-borrower in proportion to his share in the loan. For taking such deduction it is necessary that such co-borrower must also be co-owner of that property. If the assessee is a co-owner but is repaying the full loan himself, then he can claim the deduction of full interest paid by him.
The limit of deduction in case of Self occupied property applies individually to each co-borrower. In other words, each co-borrower can claim deduction up to Rs. 2 lakh/Rs. 30,000. No limit is applicable to let out property.