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How to claim from your employer deduction

Subhash Lakhotia
Tax and Investment Consultant
Tax Guru: CNBC Awaaz

In the recent past, salaried employees have shown keen interest in taking advantage of the tax provisions by making investment in the residential house property. lt is very well known fact that salaried employee like any other tax payer were to construct a residential house property or were to buy a residential house property by taking loan then he would enjoy a special deduction in respect of interest on loan to the maximum extent of Rs. 2,00,000 per annum particularly if the loan is taken after 1st  of April, 1999. Now comes the next very important question and i.e. how to claim deduction from the employer itself  in respect of the interest which is paid or which is payable in respect of self-occupied residential property. Well, under the provisions of the Income-tax Act, 1961, it is possible for the employer to grant deduction to the employee in respect of the loss by way o( interest in respect of the property so purchased by the employee. The biggest advantage of this deduction is that the Interest so payable in respect of the housing loan is deducted by the employer from the salary income of the employee. Thus,  without going to the tax department the employee is able enjoy tax concession or tax benefit In respect of interest payment on the housing loan direct from the hands of the employer.

Well to enjoy this big bonus benefit of gaining the deduction right from the employer in respect of interest on the housing loan there are certain obligations which are cast on the employee. The employee should very carefully understand these obligations and comply with the formalities as are required by the law and thereafter submit necessary papers and details concerning the interest on loan to the employer. It may please be noted that if these formalities are not complied with and if the details pertaining to the interest on housing loan etc. is not provided to the employer In that event the employer will not be under any obligation to grant deduction in respect of the interest on the housing loan for self-occupied property. It is also worthwhile to note that if due to non-submission of the papers from the end of the employee if the employer does not grant deduction in respect of the interest on the housing loan to the employee than the employer will be deducting the income-tax on the gross total salary income without giving any benefit or deduction or rebate in respect of the interest on the housing loan. If the employer does not grant necessary deduction in respect of the housing loan due to non-submission of the papers or details etc. by the employee to the employer, in that event, the employee will have no option except to proceed for claiming the deduction by filing the Income-tax Return. Although it is possible to claim the deduction even at the time of filing the return but that would be not a good investment decision because the tax had already been deducted at source on the salary income by the employer Without the deduction being granted in respect of the housing loan interest.

Now, let us see very briefly as to how to go about so as to claim a deduction right from the employer in respect of interest on the housing loan on account of capital borrowed tor residential property. To claim this deduction of interest in the first phase please do remember that you take loan for housing after 1“ April, 1999, and this loan can be from any person or organization and that the loan should be for constructing or acquiring the residential house and the construction or acquisition of such residential unit out of such loan amount has to be completed within three years from the end of the financial year in which the capital is borrowed. Further please do remember that the most important point to claim the deduction in respect of the interest on housing loan upto Rs. 2,00,000 would be that the employee should furnish a certificate from the person to whom an interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the residential house Thus, it is very clear that unless and until the details of the interest is provided to the employer and that unless and until a certificate from the person to whom the interest is to be paid is provided to the employer the employer would be reluctant to grant deduction in respect of the interest on borrowed loan for residential purpose.

Finally please do remember a small tip or advice to all those employees who have taken housing loan. Please obtain a certificate from the person from whom you have taken housing loan stating the estimated Interest due in respect of the current financial year. After obtaining the certificate please give certificate to your employer. Now alter receipt of this certificate the employer would deduct the interest payable by you in respect of the residential house property from your gross total salary income and thereafter deduct tax only on the net amount. Thus, we find enjoying the deduction in respect of interest on loan from the employer for property loan is really a simple and easy provided you submit the details as also a certificate to the employer. Please also do remember that the maximum deduction for housing loan interest to Rs. 2,00,000 is available on and from the financial year 2014-15 relevant to Assessment year 2015-16.

The author is tax & investment consultant at New Delhi for last over 40 years. He is also Director of M/s R.N. Lakhotia & Associates & The Strategy Group.

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