The article talks about various types of loans that taxpayers can claim for a tax deduction. These are home loans, personal loans and education loans. The equated monthly instalment (EMI) of a loan has two components i.e. principal and interest. A person who takes a loan has to pay the loan amount plus the applicable interest rate on it. Both the components, the principal repayment and payment of interest on the loan qualify for deduction under two separate sections of the Income-tax Act, 1961. The tax exemption limit on the interest amount for home loan varies depending on the occupancy. You will not be able to claim the deduction until the property is constructed and possession handed over to you.
Vaibhav Sankla, Director, H&R Block India, explains that tax laws do not define loans the way banks do. Therefore, tax laws only take into account the purpose for which you take the loan. The tax laws for home loans will apply to a personal loan (taken for buying a house), including its down payment. Similar to a home loan, the deduction for the interest payment and principal repayment can be claimed under section 24(b) and section 80C respectively. For claiming tax benefit, you will have to provide the interest payment certificate and bank statement.
The article points out the difference between the tax benefit you can claim on home loan/personal loan and education loan. Unlike home loan and personal loan, the principal repayment of an education loan does not qualify for tax benefits. But, you claim the deduction for the entire interest paid.
Source : Livemint