If you take a loan from specified financial services, you are eligible for the following deductions under the Income Tax Act, 1961.
Standard Deduction under Section 24 of House Property:
The following section provides a deduction on interest paid for a loan taken for repairs, renewal, or construction of a property.
If the amount of loan is taken on or after 1st April 1999, then the maximum amount of deduction allowed is Rs. 2,00,000, if the following criteria have been followed: a) If the loan is borrowed on or before 1st April 1999 for construction of a property. b) Acquisition and construction is completed within 5 years(3 years from the assessment year 2016-17) from the financial year in which the loan was borrowed.
Note: Interest on the pre-construction period is deducted in 5 equal installments. The first installment is deducted in the financial year in which construction is completed or in which property is purchased. If capital is borrowed for any purpose other than construction i.e. for repairs or renewal, then the maximum deduction allowed is Rs. 30,000.
Deductions from Gross Total Income - Section 80C (2) (XVII) of the Income Tax Act, 1961:
A deduction on payment of a principal amount is available up to Rs. 1,50,000. This maximum deduction is inclusive of all the amounts covered under Section 80C.
Stamp duty, registration fees, or other such expenses incurred are also eligible for deduction.
Income Tax Certificate
Every bank issues Income Tax Certificates that stands as proof for payment of interest and repayment of the principal amount.
This certificate contains the amount of interest and the principal amount paid in a particular year.
This certificate should be attached to the Income Tax Return for availing of tax benefits.