What is Section Under 23 1 C?

Everyone paying taxes always stays on the lookout for deductions to get some amount of relief. I am no different. I came to know about Section 23 1 C of Income Tax Act through a social media post and I realized how big a boon it was for taxpayers like me. If you don’t know about it, let me be your guide. 

What is Section under 23 1 C?

Section 23 1 C of the Income Tax Act of India refers to the deduction allowed for the interest paid on a loan taken for the purpose of purchasing or constructing a self-occupied property. This section is a significant provision in the Income Tax Act as it provides relief to taxpayers who have taken a loan to acquire a property. As per the provisions of section 23 1 C, a deduction of up to Rs. 2 lakhs is allowed on the interest paid on a home loan taken for self-occupied house property. This deduction is available to both individual taxpayers and Hindu Undivided Families (HUFs). It is important to note that the deduction is only allowed on the interest component of the home loan and not on the principal repayment.

In case the taxpayer has taken a joint home loan with another person, both the borrowers are eligible for a deduction of up to Rs. 2 lakhs each, provided they are co-owners of the property and are also co-borrowers for the loan. The total deduction available in such cases would be up to Rs. 4 lakhs.

It is important to note that this deduction is only available for a self-occupied property, i.e., a property that is occupied by the taxpayer for his/her own residential purposes. In case the property is let out, the entire interest paid on the loan is allowed as a deduction from the rental income under section 24 of the Income Tax Act. If the property is deemed to be let out, i.e., the taxpayer has more than one house property but does not occupy all of them for residential purposes, then the deduction under section 23 1 C is restricted to Rs. 2 lakhs per financial year.

In addition to the above, there are certain other conditions that need to be fulfilled to claim the deduction under section 23 1 C. The loan should be taken for the purpose of purchase or construction of a house property. The construction of the house property should be completed within five years from the end of the financial year in which the loan was taken. The taxpayer should also possess a certificate from the lender specifying the amount of interest paid on the loan during the financial year.

Section 23 1 C of Income Tax Act is a beneficial provision for taxpayers who have taken a loan for purchasing or constructing a self-occupied house property. It helps in reducing the overall tax liability of the taxpayer by allowing a deduction of up to Rs. 2 lakhs on the interest component of the home loan.