Home Loan Tax Benefits: Under the Income Tax Act, a person can avail tax benefits on home loans taken for more than one house. But taking all home loans together, tax exemption can be claimed under 80C only on principal amount up to Rs 1.50 lakh per year and interest payment up to Rs 2 lakh. Know from Balwant Jain, an expert on tax matters, in which cases tax is not payable on withdrawing money from EPF even after not completing 5 years of service.
Question: After working for 4 years and 4 months, I have decided to do some work of my own. Can I withdraw the entire money from my EPF account? I am knowing that it is necessary to serve for five years to withdraw full amount from EPF account on which no tax has to be paid. Is there any other option or declaration form for a person who does not want to continue in the job? Or will have to pay tax.
Answer: As far as the money deposited in the EPF account is concerned, if you have not worked for 5 years and have not deposited money in the EPF account for five years, then according to Rule 8 of the Income Tax Act, you will have to pay tax on withdrawing the money deposited in the Provident Fund. Will happen. Tax exemption is available on certain conditions for withdrawing money from EPF before 5 years. If the employee has lost his job due to ill health or if the employer has decided to close the business or not to continue the business or any other reason over which the employee has no control then the tax can be exempted. But in your case there is no such thing and you have not completed the period of five years of service. In this case, whatever amount you withdraw from EPF, you will have to pay tax on it. If the total amount is more than Rs 50,000, then the PF authority or trust will make the payment after deducting 10% tax. The amount deposited in EPF by the employer will be taxable under the head salary. At the same time, tax will be charged on the amount and interest on the employee’s share under Income from Other Sources. If there is no other income, you can claim tax exemption under standard deduction.
Question: I already have a house in Rajasthan where my parents live and I have taken a home loan for this house. Major part of the loan has been repaid. I want to buy another house in Pune where I have been living for the last four years. Can I claim tax benefits for two houses at once? Is it possible to waive off the tax exemption available on the first home loan as the outstanding principal amount and interest amount is not high.
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Answer: How many houses can a person own or can avail home loan for how many houses? There is no restriction regarding this in the tax law. The tax law allows a person to have a maximum of two houses as Self-Occupied. The house occupied by your parents will be considered as self-occupied for this purpose. In this case, the tax law allows you to claim tax exemption on the principal amount of any number of home loans within the overall limit of Rs 1.50 lakh in a year under Section 80C. Similarly, in respect of a maximum of two Self-Occupied houses taken together, you can get tax exemption on the amount of interest paid up to two lakhs every year. In such a situation, within the limits mentioned above, you can take advantage of tax exemption on the home loan for both the houses.
Balwant Jain is a tax and investment expert and can be reached on Twitter at @jainbalwant and email at jainbalwant@gmail.com.
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