Under the Income Tax Act, 1961 an individual is eligible for tax benefits on Principal and Interest components of a Loan.
Under Sec 24 (1) (Vi), interest payments of up to Rs.150,000/- can be claimed as deduction from the Taxable Income, if the property is self occupied. In case of let-out properties, the entire interest payable can be claimed as a deduction.
Under Sec 88, tax benefits can be availed in repayment of principal up to Rs.20,000/- per annum. Persons having salary income of upto Rs. 100,000/- per annum will get an enhanced tax rebate at the rate of 30% (Assessment Year 2002 - 2003) in respect of their eligible investments under this section as against 20% as per the current provisions. These benefits are available only for the sum borrowed after 1/4/1999 and if the acquisition or construction is completed before 1/4/2003. The said tax benefits are available for Loans borrowed for the purpose of extension, repair or renovation.
Exemption of long-term Capital Gains can be availed for investment in a second property.
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