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  1. yes ,you are right ,rebate/deduction will not be available if house is sold within 5 years .this is as per section 80c Current and 88old.
    but interest claimed on house loan will not have any effect at all.but principal claimed as deduction/rebate will be add back for all the year if house is sold before the 5th year.relevent clause is given hereunder.

    “(5) Where, in any previous year, an assessee

    (i) terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,

    (a) in case of any single premium policy, within two years after the date of commencement of insurance; or

    (b) in any other case, before premiums have been paid for two years; or

    (ii) terminates his participation in any unit-linked insurance plan referred to in clause (x) or clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

    (iii) transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,


    (a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and

    (b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.”