Question

Regarding cancellation of house tax for demolished house

Answer 1

Answer:

"Demolishing a house and building a new one on the same plot is considered reconstruction of the house. As per Section 80C, deduction is allowed for repayment of loan taken for acquisition and construction of a house and not reconstruction. Hence, you are not eligible to claim deduction for repayment of principal amount. As per Section 24(b), deduction is allowed for interest paid on loan taken for reconstruction of property. The deduction amount cannot exceed Rs 30,000 if it is a self-occupied property. If the property is let out, the whole interest is allowed but the loss under the head, house property, will be adjusted only up to Rs 2 lakh and the balance carried forward to the next year."