Tax Benefit on Home Loan: Section 24, 80EE & 80C

While taking a home loan brings you closer to the prospect of owning your own dream property, it also comes with tax benefits that you can avail. Considering the fact that when you take a home loan to buy real estate, the loan is of a large amount, being aware of these tax benefits is crucial. When you use them correctly, you will be able to a save a significant amount of money.

So, take a look at this guide to familiarise yourself with the tax benefits that you can claim when you take a Home Loan.
 

Benefit on Home Loan Principal Repayment

While repaying the principal amount of your home loan, you can benefit from a tax deduction of up to Rs.1.5 lakh as per Section 80C of the Income Tax Act. You can avail this benefit only after the construction of the property is complete. Also, if you sell the property within 5 years of possession, the benefit will be reversed. The amount that you have claimed will get added back to your income in the year in which you make the sale. This section also allows you to claim the amount that you pay on stamp duty and registration as a deduction, regardless of whether you take a home loan or not.
 

Benefit on Home Loan Interest Payment

You can claim deductions with regards to the interest that you pay on your home loan under Section 24 of the Income Tax Act. If your property is self-occupied, you can claim an exemption of up to Rs.2 lakh as long as the property is completed in 5 years. If its completion exceeds this time frame, the limit drops and you can claim up to Rs.30,000. On the other hand, if you aren’t occupying the property yourself, there is no limit on how much you can claim as an exemption, regardless of the status of completion.

Benefit for First-Time Homebuyers

While you can claim deductions on the principal and interest amount of your home loan under Section 80C and Section 24, you can also claim an additional tax deduction as a first-time homebuyer. Under Section 80 EE, you can claim an extra Rs.50,000 per financial year towards interest payments. Bear in mind that the value of your home must be less than Rs.50 lakh, and the value of the home loan must be under Rs.35 lakh.

Benefit for Joint Owners and Co-Borrowers

You may apply for a Joint Home Loan along with your spouse, friend or even relative. In such a case, you are eligible for tax benefits as long as you co-own the property as well. You can each make claims up to the full amount under Section 80C and Section 24. So, if tax-saving is on the agenda, this move will help you boost your savings significantly.

Understanding HRS and Home Loan

If you have taken a home loan, but you are still renting another apartment where you are currently staying, you can make two claims. You can claim the aforementioned tax benefits while also claiming the tax benefit pertaining to HRA (House Rent Allowance).

So, if you are taking a home loan, don’t forget to use these tax breaks to maximise your savings. Plan in advance so that you have ample time to fill in the paperwork and provide any supplementary documents that may be necessary.

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