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Can I get income tax benefit on home loan prepaid and penalty charged?

The aggregate amount of deduction available under Section 80C shall not exceed Rs. 1.50 lakh irrespective of the amount of home loan repaid by you (iStock)Premium
The aggregate amount of deduction available under Section 80C shall not exceed Rs. 1.50 lakh irrespective of the amount of home loan repaid by you (iStock)

  • The deduction under Section 80 C for principal repayment of qualified home loan is available along with various other payments like Life Insurance Premium, ELSS, NSC, PPF, Provident Fund and tax saving bank FD, tuition fee for children etc

I have fully repaid my housing loan to LICHFL in December, 2020 for my self-occupied flat. The lender has also charged me a prepaid penalty for this. Can I get any tax benefit for amount of loan repaid and the prepayment penalty?

As per Section 80C an Individual is are entitled to a deduction upto Rs. 1.50 lakh in respect of amount repaid towards repayment of home loan taken from specified institutions. This deduction is no necessarily restricted to the component of principal repayment comprised in your monthly EMI but is also available for any part or full prepayment made during the year. Please note that the aggregate amount of deduction available under Section 80C shall not exceed Rs. 1.50 lakh irrespective of the amount of home loan repaid by you.

The deduction under Section 80 C for principal repayment of qualified home loan is available along with various other payments like Life Insurance Premium, ELSS, NSC, PPF, Provident Fund and tax saving bank FD, tuition fee for children etc.

As regards claim of prepayment penalty paid by you, as per the provisions of income tax any fee or charges paid in connection with the loan is also treated as interest and therefore you will be able to claim the amount of processing fee paid by you under Section 24(b) along with the amount of interest paid by you during the year but only within the overall limit of Rs. 2 lakhs applicable for a self-occupied house property.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail and @jainbalwant on Twitter

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