How and when to revoke home loan tax deductions

A number of sections under income tax falls under the category where you can claim deductions for investments and expenses incurred during the particular financial year. Deductions like these help in bringing down the taxable income and also reduce your tax liability.

For further information, in many cases, a lock-in period is specified against which you may have claimed a deduction.In case you fail to observe the lock-in period, the deductions that you availed can be officially cancelled.
Here is the detailed information about the lock-in periods that need to be observed if you have claimed deduction against repayment of home loan principal amount.
Lock-in period
Though there is no as such lock-in period for deduction claimed against interest payment on home loan as per section 24(b) or 80EE, the section 80C(5) (relating to repayment of principal) of the Income Tax Act specifies that if you sell your house within 5 years from the date of purchase, the deduction claimed on principal repayment during previous years gets revoked. In such a scenario, all deductions claimed for the home loan principal repayment under section 80C during the previous years also have to be clubbed and added to income of the year of sale, and be taxed depending on that only.
In addition to the home loan principal amount, the stamp duty and registration fee paid for registration of property also qualifies for deduction under section 80C in the year of purchase. If you had claimed registration fee and stamp duty also as deduction, you need to observe 5-year lock-in in such cases too.
The deduction on home loan
In case you take a home loan for buying or building a house, the capital repayment and interest paid on the loan qualify for deduction under separate income tax sections. While the principal repayment falls under the section 80C of the Income-tax Act, 1961 and has a total limit of Rs 1.5 lakh a year, the interest payment on home loan qualifies for deduction under section 24 (b) of the Act, with a total limit of Rs 2 lakh a year. There is an additional deduction of Rs 50,000 for interest payment on home loans under section 80EE for the first-time homebuyers.