We got a housing loan in October 2011 from a financial institution to buy a flat in a newly commenced project. We took possession of the flat after completion only during July 2013.

The repayment towards principal started from August 2013 by way of equated monthly instalments (EMIs).

Pre-EMI interest was being paid since October 2011 till the date of possession in July 2013. The flat is self-occupied.

Kindly clarify the provisions available for claiming exemption from income.

- ANS Murthy

Deduction for interest paid on the home loan can be claimed under the head “Income from house property” once construction is complete and possession is taken.

Pre-construction interest can be claimed in five equal instalments starting from the year in which construction has been completed - in your case, from 2013-14.

For self-occupied properties, where the house property was purchased or constructed within three years from the financial year in which capital was borrowed, a deduction for interest payable during the year up to a maximum of ₹1.5 lakh can be claimed during the year (including the pre-EMI interest).

Similarly, deduction is allowed for any repayment of the amount borrowed (principal only) by the assessee for purchase or construction of a residential house property, the income from which is chargeable to tax under the head “Income from house property” which is only when the construction is completed and possession is handed over. This deduction is available in the overall limit of ₹1 lakh u/s 80C of the Income-tax Act, 1961.

My wife is a home maker and a senior citizen. She has rented out her house.

She does not file income tax returns as her income is far below the taxable limit.

The tenant says that for him to claim tax relief for house rent paid, the house owner must be an income tax assessee. Is that true?

- VE Asokan

As per the income-tax law, house rent allowance (HRA) paid to an assessee by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee shall be exempt up to the prescribed limits. As a proof that rent has actually been paid, the Central Board of Direct Taxes , has directed all employers to collect the permanent account number (PAN) of the landlord from the employee if the total rent paid during the year exceeds ₹1 lakh.

Where a PAN has not been applied for by the landlord, a declaration is to be furnished by him/her.

Since your wife does not file a return of income , we understand that she does not have PAN.

Assuming that the rent received by her from the tenant is more than ₹1 lakh during the year, she can give a declaration to this effect to the tenant with her name and complete address, who can then submit the said declaration along with other documents to his employer to claim HRA exemption .

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