Income Tax Deduction for Purchase or Construction of House

Section 80C Deduction is available for payments made by an assess for purchase or construction of a residential house. The deduction under Section 80C can be made from the head gross total income. The deduction will be admissible if the income from the house property is assessable to tax under the head ‘income from house property’. In this article, we look at Section 80C deduction for purchase or construction of a house in detail.

Deduction Eligible under Section 80C

The following types of payment made by the assessee in the previous year towards purchase or construction of a residential house is eligible for deduction under Section 80C:

1. Installment or part payment of the amount due under any self-financing or other schemes of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis.
2. Installment or part payment of the amount due to any company or cooperative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him.
3. Repayment of an amount borrowed by the assessee for purchase or construction of residential house fro:
   1. Central Government or any State Government.
   2. Any bank, including a cooperative bank.
   3. Life Insurance Corporation of India.
   4. National Housing Bank.
   5. Housing finance company 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.
   6. Any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses.
   7. The assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act.
   8. The assessee’s employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society.
4. Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee.

Expenses NOT Deductible under Section 80C

The following types of expenses are not eligible for deduction under Section 80C:

1. Admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member.
2. The cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out.