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I took a home loan in November 2004. The house is under construction and will be ready for possession only by January 2007.

I have made the full payment to the builder and taken the entire loan amount at one go. As a result, I have already started paying the Equated Monthly Installments instead of the pre-EMIs.

Can I avail of the tax benefits?

- Arvind Kejriwal

In your case, tax benefits for the loan repayment will first be available only in respect to the financial year ending March 31, 2007 (assuming, of course, that the construction is indeed completed by March 31, 2007).

In 2007, you will be eligible for the entire interest payable then (ie from April 1, 2006, onwards), plus 1/5th of the interest payable from the date of disbursement till March 31, 2006.

If the property is self-occupied, the deduction will be limited to a maximum of Rs 150,000 per year.

The deduction for the principal amount repaid will begin from the financial year ending March 31, 2007. No tax benefit is available for the principal repaid before March 31, 2006, and this benefit is lost forever.

• 5 questions home loan seekers ask

If the house is in the name of two people (say spouses) and both are co-applicants for the home loan, can the amount of principal repaid and interest paid be split between the two?

In what proportion is it done? Is it always 50:50?

- Rama Devi

The tax benefits for loan repayments will be split in the ratio of the share in the home loan.

Let's say the joint owners and co-borrowers are the spouses.

Cost of the apartment: Rs 1,00,00,000 (Rs 10 million)
Ownership share: 60% (husband), 40% (wife)
Loan: Rs 60,00,000 (Rs 6 million)

Amount to be brought in by husband: Rs. 60,00,000
Less actual contribution by husband: Rs 20,00,000 (Rs 2 million)
Husband's share in the loan: Rs 40,00,000 (Rs 4 million)

Amount to be brought in by wife: Rs 40,00,000
Less actual contribution by wife: Rs 20,00,000
Wife's share in the loan: Rs 20,00,000

The maximum limit of Rs 150,000 on interest paid will apply individually to both of you (ie the total deduction will be limited to Rs 300,000). Check explanations to Section 26 as well as section 23 (2) and section 24 (b).

The tax benefits will be shared in the ratio of 2:1 for husband and wife since that is the share of the loan for husband and wife.

• Buying an apartment? Ask these questions

My husband and I have jointly taken a home loan to purchase an apartment in my name.

The payments towards the loan will take place from my husband's account. In this case, who can avail of the tax benefit?

Only owners or co-owners are eligible for tax benefits on home loan repayments. Since your husband is neither, he is not eligible for any tax benefits.

You cannot claim any tax benefits for the principal repaid under section 80C, since you are not paying the installment yourself.

However, you can claim a deduction under Section 24 for the interest portion as long as the amount repaid by your husband is shown as a loan payable by you to him.

My father and I have jointly taken a home loan. The EMIs are paid from my salaried account.

Can I claim the entire interest/ principal for tax benefits?

- Avinash Patange

Please check the answer above.

• 10 MUSTs before you buy that house

My father, brother and I purchased a home three years ago. Each of us claimed one-third of the interest paid as deduction in our return of income till March 2005. The entire EMI was paid from my savings account.

Now my brother has left India so he will not have any taxable income here.

Can my father and I now claim half the interest instead of one-third the interest?

- Kaushal Shah

You cannot change the share in the loan without changing your ownership pattern.

Any change in ownership pattern might have stamp duty implications besides requiring the approval of the home loan lender.

• Claim home loan benefits, HRA

Harsh Vardhan Roongta is CEO, Apnaloan.com, and co-author of the book, The Complete Home Loan Guide -- Where To Go, Whom To Ask, What To Do. Click here to check the online book store.

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