Deductions to be made in computing total incomeCentral
Section 130 of Income Tax Act 2025 in hindi
- (1)An assessee, being an individual, shall be allowed a deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property as per the provisions of this section.
- (2)The deduction under sub-section (1) shall not exceed Rs. 50000 and shall be allowed in computing the total income of the individual for the tax year beginning on the 1st April, 2016 and subsequent tax years.
- (3)The deduction under sub-section (1) shall be subject to the following conditions:—
- (a)the loan has been sanctioned by the financial institution during the period beginning on the 1st April, 2016 and ending on the 31st March, 2017;
- (b)the amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees;
- (c)the value of residential house property does not exceed fifty lakh rupees; and
- (d)the assessee does not own any residential house property on the date of sanction of loan.
- (4)Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other tax year.
- (5)For the purposes of this section,—
- (a)"financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act or a housing finance company;
- (b)"housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.
Summary
- An individual can claim a tax deduction for interest payable on a loan taken to buy a residential house.
- The loan must be taken from a financial institution, which includes banks or housing finance companies.
- This deduction applies to the tax year starting on April 1, 2016, and any years after that.
- If you claim this deduction, you cannot claim a deduction for the same interest under any other part of the tax law for any tax year.
- A housing finance company must be a public company registered in India whose main business is providing long-term loans to build or buy residential houses in India.
Practical examples
1Anil bought his first apartment in Mumbai in October 2016 and took a home loan from HDFC Bank. His interest payable for the year was 45,000 rupees. Since his interest is under the limit, he can claim a deduction of the full 45,000 rupees under this section.
2Sunita took a housing loan from a registered housing finance company to buy a small house in Noida. Her interest payable for the tax year was 65,000 rupees. She can claim a deduction of 50,000 rupees under this section, but she cannot claim the remaining 15,000 rupees under any other section of the Act.
FAQ
1. Can I claim this deduction if I borrow money from a friend or relative?
No, the loan must be taken from a financial institution, which means a banking company covered by the Banking Regulation Act, 1949 (including banks under section 51 of that Act) or a registered housing finance company.
2. Can I claim this deduction and also claim the same interest under another section?
No, subsection (4) states that if you claim a deduction under this section, you cannot claim it under any other provision of the Act for the same or any other tax year.
3. From which tax year did this deduction become available?
This deduction is available for the tax year beginning on the 1st April, 2016 and subsequent tax years.
Test yourself
Q1.What is the maximum limit of deduction allowed for interest on a loan under Section 130?
Q2.What does "housing finance company" mean under Section 130?
Q3.If a deduction for interest is allowed under Section 130, can it be claimed under other provisions of the Act?