Union Budget 2020: Five things about home loan incentives you should know

1. Even a loan taken from an employer, friend, private lender is eligible for deduction — but only the interest component and not the principal amount. And you’ll need a certificate from the lender.2. Booking an apartment which is under construction is sometimes cheaper. I-T law permits you to claim the total interest paid during the pre-delivery period as a deduction in five equal instalments starting from the fiscal in which construction was completed or you acquired your apartment (generally this denotes the date of possession). Of course, the maximum you can claim as deduction per year continues to be 2 lakh in case of selfoccupied property (but, you could be eligible for the additional interest deduction, as explained).3. It makes tax sense to purchase the new apartment jointly — say with your spouse, then each of you is entitled to a deduction of 2 lakh for interest funded by each of you, as explained above. In case you have a working son/daughter and the bank is willing to split the loan three ways, all three can avail deduction up to 2 lakh each on self- occupied property. Add to it the additional interest (if applicable for rented or deemed to be let out property), and the savings can be significant.4. No notional rent will be added to the taxable income of your second self-occupied house property. Thus, if you don’t find a ready tenant you can keep it self-occupied. Do note, that this leeway is available only for up to two houses. A third house which is not let out will still attract tax on its ‘deemed value’. In other words, tax will be calculated at expected market rent.5. The total loss from house property which can be adjusted with any other income (salary, other source) has been capped at 2 lakh. Further, if you are unable to set off the interest of 2 lakh against any income head, the (surplus) interest which could not be set-off can be carried forward only for eight assessment years. Additionally, such set-off is possible only against ‘income from house property’. It becomes a sunk cost if you haven’t let out your house on rent.