499. Repayment of loans, etc., taken for purchase/construction of house - Whether deduction admissible under sub-clause (ii) of clause (b) of sub-section (2) where construction of house is still continuing during previous year relevant to assessment year 1988-89
Circular No. 498 was issued by the Central Board of Direct Taxes on 4 November 1987. Its subject is 499. Repayment of loans, etc., taken for purchase/construction of house - Whether deduction admissible under sub-clause (ii) of clause (b) of sub-section (2) where construction of house is still continuing during previous year relevant to assessment year 1988-89.
Tells drawing and disbursing officers that repayment of a housing loan does not attract the section 80C deduction for a house still under construction. Under the sub-clause dealing with a sum paid towards purchase or construction of a residential house, the construction must be completed after 31 March 1987 and the income from the property must be chargeable under the head income from house property in the relevant assessment year. So where construction is not complete by the end of the previous year relevant to assessment year 1988-89, no deduction is admissible in that year's assessment, and the point is to be kept in mind while deducting tax under section 192 during the financial year 1987-88.
References were received asking whether repayment of a loan taken to buy or build a new residential house qualifies where construction is still going on. The circular follows up paragraph 4(8)(e)(ii) of Circular No. 489 dated 25 June 1987, which had explained the section 80C housing incentives.
499. Repayment of loans, etc., taken for purchase/construction of house - Whether deduction admissible under sub-clause (ii) of clause (b) of sub-section (2) where construction of house is still continuing during previous year relevant to assessment year 1988-89
1. I am directed to refer to para 4(8)(e)(ii ) of this Department's Circular No. 489 [F. No. 275/51/87-IT(B)], dated 25-6-1987 [see under section 192] wherein the incentives provided under section 80C to the income-tax payers in respect of housing loans, etc., taken from specified institutions have been explained.
2. References have been received from some quarters enquiring whether the repayment of loans taken for the purchase or construction of a new residential house property, the construction of which is still continuing would qualify for deduction under section 80C.
3. According to the provisions of sub-clause (ii) of clause (h) of sub-section (2) of section 80C, in computing the total income of an assessee, a deduction shall be allowed for any sum paid towards the purchase or construction of a residential house property subject to the fulfilment of the conditions laid down therein. For the admissibility of this deduction, the construction of the house property should be completed after 31-3-1987 and the income from the same should be chargeable to tax under the head 'Income from house property' in the relevant assessment year. For the guidance of Drawing and Disbursing Officers and other persons responsible for the payment of income chargeable under the head 'Salaries', it is clarified that in a case where the construction of the property does not get completed by the end of the previous year relevant to the assessment year 1988-89, no deduction under this provision shall be admissible to the assessee in the assessment of his income for this assessment year. This aspect may please be kept in mind while deducting the tax at source under section 192 in the financial year 1987-88.
Circular : No. 498 [F. No. 275/111/87-IT(B)], dated 4-11-1987.
A short deduction order against an employer who gave section 80C credit for housing loan instalments on a house not yet finished.
Source: the Income Tax Department’s own published text — its page for this instrument.