How to Declare Home Loan in Income Tax: A Complete Guide

Are you wondering how to declare a home loan in your Income Tax Returns? You are not alone. Many people get confused about the tax benefits associated with home loans. Knowing how to declare it correctly can help you save a significant amount on taxes. In this article, we will break down everything you need to know in simple language.

Understanding home loan tax benefits

Before diving into the declaration process, let us understand the tax benefits on home loans. When you take a home loan, you are eligible for two main types of tax deductions:

1. Interest paid on the loan: Under Section 24(b), you can claim a deduction on the interest paid on your home loan.

2. Principal repayment: Under Section 80C, you can claim a deduction for the principal amount repaid during the year.

Let us look at how you can declare these components in your income tax.

Declaring home loan interest in Income Tax

If you are claiming interest paid on your home loan, it is essential to know how to enter it in your Income Tax Return (ITR) form. Here is a step-by-step process:

1. Collect the interest certificate: Get an interest certificate from your lender. This certificate will show the total interest paid during the financial year.

2. Determine the property type: Identify whether the property is self-occupied or rented out. For self-occupied properties, the maximum deduction allowed is Rs. 2,00,000 per year. There is no upper limit for let-out properties, but the overall loss that can be set off under the head of ‘House property’ is capped at Rs. 2,00,000.

3. Enter details in the ITR form: In the ITR form, go to the section for “Income from House property.” Here, you will enter the total interest paid under the column “Interest on Borrowed Capital.” This will be deducted from your gross total income, reducing your taxable income.

Declaring home loan principal repayment in Income Tax

Principal repayment is covered under Section 80C of the Income Tax Act. Here is how you can declare it:

1. Get the principal repayment certificate: Along with the interest certificate, your lender will provide a certificate showing the principal repaid.

2. Enter details in the ITR form: Go to the “Deductions” section of the ITR form. Under Section 80C, enter the amount of principal repaid. The maximum limit for claiming principal repayment is Rs. 1,50,000.

Tip: If you have a joint home loan, each co-borrower can claim separate deductions, effectively doubling the tax benefits.

What if the property is under construction?

If your property is still under construction, you cannot claim the interest until you get possession. However, the pre-construction interest can be claimed in five equal instalments over five years, starting from the year you receive possession. This pre-construction interest is added to your regular interest deduction under Section 24(b).

For example, let us say your total pre-construction interest is Rs. 1,00,000. You can claim Rs. 20,000 every year for five years, starting from the year of possession.

Claiming deductions on joint home loans

If you have taken a joint home loan, the tax benefits can be claimed by all co-borrowers individually. Here is how it works:

• Each co-borrower can claim up to Rs. 2,00,000 under Section 24(b) for interest paid and Rs. 1,50,000 under Section 80C for principal repayment, provided they are also co-owners of the property.

• This means a joint home loan can double the tax benefits, making it a great option for couples or business partners.

Additional tax benefits of home loans

Home loans come with a few more tax benefits that you should be aware of:

1. Stamp duty and registration charges: You can claim these charges under Section 80C in the year they are paid, provided they do not exceed the Rs. 1,50,000 limit.

2. Deduction for first-time home buyers: Under Section 80EEA, first-time home buyers can claim an additional deduction of up to Rs. 1,50,000 on the interest paid, provided the loan meets specific criteria.

3. Home loan balance transfer: If you opt for a home loan balance transfer, the tax benefits continue as long as the new loan is for the same property.

What documents are needed to declare home loan in Income Tax?

To declare a home loan in income tax, you will need the following documents:

• Interest certificate: Shows the interest paid during the financial year.

• Principal repayment certificate: Shows the principal repaid.

• Proof of ownership: Property documents to confirm ownership.

• Possession letter: If you are claiming pre-construction interest.

Important sections to remember

• Section 24(b): Allows deduction on home loan interest.

• Section 80C: Allows deduction on principal repayment.

• Section 80EEA: Additional interest deduction for first-time home buyers.

Knowing these sections helps you understand where to declare your home loan and what benefits you can claim.

Additional read: Process for Electronic Filing of Income Taxes

Choosing the right home loan

If you have not taken a home loan yet, it is crucial to choose a loan that offers competitive interest rates and flexible repayment terms. Bajaj Housing Finance Home Loan is one such option that provides excellent benefits and fast approval, making it easier for you to finance your dream home.

For those planning to take a home loan, Bajaj Housing Finance offers convenient funding solutions. Here are a few benefits of opting for a home loan from us:

1. High loan amount: Make your homeownership dreams a reality with a loan amount of up to Rs. 15 crore*.

2. Low interest rates: Enjoy affordable EMIs starting at just Rs. 741/lakh*, with interest rates as low as 8.25%* p.a.

3. Fast approval: Get your loan sanctioned in as little as 48 Hours*, or even sooner.

4. No foreclosure charges: With a floating interest rate, you can prepay or close your loan without any extra fees.

5. Hassle-free application: Our convenient document pickup service means you will not have to visit the branch multiple times.

6. EMI calculator: You can also use our free online home loan EMI calculator estimate your monthly payments.

Do not wait any longer—apply for a Bajaj Housing Finance Home Loan today and move closer to owning your dream home.