You can get home loan tax benefit under different sections like Section 80 EEA, which provides income tax benefits of up to Rs. 1.5 lakh on the home loan interests paid. These home loan tax benefits are available over and above the existing exemption of Rs. 2 lakh under Section 24(b).
You can get tax benefit on home loans under Section 24, 80C, and 80EE/ 80EEA only if you choose the old tax regime. The new tax regime (Budget 2023) does not include these provisions.
These home loan tax exemptions can only be claimed to purchase houses with a stamped value of up to Rs. 45 lakh. Thus, borrowers will be able to claim a maximum income tax deduction of Rs. 3.5 lakh.
Income tax benefits under Section 80 EEA are available to those availing home loans in India under the PMAY CLSS scheme.
As per the new income tax rule, starting April 2023, no new home loans sanctioned in FY23-24 will be eligible to claim the tax benefits under section 80 EEA.
Sections of the Income Tax Act for tax rebate on home loan
Here are some key sections of the Income Tax Act in India that provide tax benefits on home loans:
Deduction on interest
Up to Rs. 2 lakh/yr on home loan interest for self-occupied property; no limit for non-self-occupied property
Deduction on principal
Up to Rs. 1.5 lakh/yr on principal repayment of home loan
Additional interest deduction
Up to Rs. 1.5 lakh/yr for interest on affordable housing loans
Electric vehicle loan deduction
Up to Rs. 1.5 lakh/yr for electric vehicle loan interest
Capital gains exemption
Exemption on property sale if reinvested in another property
Capital gains exemption
Exemption on non-property asset sale if invested in property
Section 24(b) & Section 56(2)(x)
Deductions for co-owned property with co-borrowers
First-time homebuyer deduction
Up to Rs. 50,000/yr interest deduction for first-time homebuyers
Exemption for HRA received while living in a rented house
Home loan tax benefits under Section 80C & Section 24
The Government of India extends these benefits as a form of relief to borrowers, making home purchase more affordable. On availing a home loan, you need to make monthly repayment in the form of EMIs, which include two primary components – the principal amount and interest payable. The IT Act enables borrowers to enjoy tax benefits on both these components individually.
1. Section 80C
These are the deductions under Section 80C
- Claim a maximum home loan tax deduction of up to Rs. 1.5 lakh from your taxable income on the principal repayment
- This may include deduction on stamp duty and registration charges but can be claimed only once and in the same year that they are incurred. Section 80C of the Income Tax Act in India provides deductions for certain specified investments and expenditures
2. Section 24
Under Section 24 of the Income Tax Act, there are two types of deductions available for home loan interest:
- Deduction up to Rs. 2 lakh: Taxpayers can enjoy a maximum deduction of up to Rs. 2 lakh on the interest amount payable for a home loan. This deduction is applicable for properties whose construction is completed within five years.
- Limited deduction if construction not completed in 5 years: If the construction of the property is not finished within the specified five-year period, the maximum deduction reduces to Rs. 30,000 instead of Rs. 2 lakh.
Home Loan Interest Deduction
Section 80EE allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. You can claim a home loan interest deduction of up to Rs. 50,000 per financial year as per this section. You can continue to claim until you have fully repaid the loan. The deduction under 80EE is applicable only to individuals, which means that if you are a HUF, AOP, a company, or any other kind of taxpayer, you cannot claim the benefit under this section. To claim this deduction, you should not own any other house property on the date of the sanction of a loan. Use the home loan EMI calculator to estimate your home loan EMIs..
Tax deductions on the Principal Amount
Tax deductions are available on the principal amount of a home loan under certain conditions. These deductions can be claimed under Section 80C of the Income Tax Act, 1961.
Here are some key points to consider:
Maximum deduction: The maximum deduction allowed under Section 80C for the principal repayment of a home loan is capped at Rs. 1.5 lakh per financial year. This deduction is part of the overall limit of Rs. 1.5 lakh that includes other eligible investments and expenses.
Conditions for claiming deduction: To claim the deduction, the property should be in your name, and the construction should be completed. If you have taken a loan for renovation or repair work, the deduction can be claimed after completion of the renovation or repair.
Tax benefit on joint home loan: In case of a joint home loan with a co-applicant, each co-applicant is eligible for a separate deduction, provided they are also co-owners of the property.
Pre-construction period: For properties under construction, the principal repayment cannot be claimed as a deduction until the construction is completed. However, during the construction period, you can claim the interest paid as a deduction in five equal installments starting from the year of completion.
Home loan certificate: The lending institution provides a home loan certificate that states the principal and interest components of the repayment. This certificate is essential for claiming the deduction while filing your income tax return.
It is crucial to keep in mind that tax laws are subject to change, so it is advisable to consult a tax professional or refer to the latest tax regulations for accurate and up-to-date information regarding tax deductions on the principal amount of a home loan in India.
Tax Deduction for First-Time Buyers
First-time home buyers who opt for a home loan can avail of certain tax deductions to reduce their tax liability. Here are some important points to consider:
Section 80EEA: Under Section 80EEA of the Income Tax Act, 1961, first-time home buyers can claim an additional deduction of up to Rs. 1.5 lakh on the interest paid on home loans. This deduction is available over and above the existing deductions allowed under Section 24(b) for home loan interest.
Eligibility criteria: To be eligible for this deduction, the following conditions must be met:
- The home loan must be taken from a financial institution between specific dates, as notified by the government
- The stamp duty value of the property should not exceed Rs. 45 lakh
- The buyer should not own any other residential property on the date of sanctioning the loan
Maximum deduction limit: The deduction under Section 80EEA is capped at Rs. 1.5 lakh per financial year and can be claimed until the repayment of the loan is completed or for a maximum of 7 years, whichever is earlier.
Joint ownership: In the case of joint ownership of the property, each co-owner who is a first-time home buyer can claim this deduction, provided they fulfill the eligibility criteria individually.
Documentation: It is essential to maintain all the necessary documents, such as loan sanction letter, loan repayment statements, and other supporting documents, to substantiate the claim while filing income tax returns.
Tax planning: It is advisable to consult a tax professional to understand the specific tax implications and benefits based on your individual circumstances and financial goals.
Remember to keep track of any changes in tax laws and consult a tax advisor to ensure accurate and up-to-date information regarding tax deductions for first-time home buyers in India who opt for a home loan.
Home loan tax benefits under Section 80EE and Section 80EEA
Both Section 80EE and Section 80EEA of the Income Tax Act provide additional tax benefits on home loan interest, specifically for first-time homebuyers.
- First-time homebuyer: To be eligible for the deduction under Section 80EE, the taxpayer must be a first-time homebuyer. It means the individual should not own any residential property on the date of the loan sanction.
- Maximum deduction: Under Section 80EE, first-time homebuyers can claim an additional deduction of up to Rs. 50,000 on the interest paid on a home loan during a financial year. This deduction is over and above the deduction available under Section 24.
- Property value and loan amount limit: The value of the property for which the loan is taken should not exceed Rs. 50 lakh. Additionally, the loan amount should not exceed Rs. 35 lakh.
- Sanction period: The home loan should be sanctioned between specific financial years, as notified by the government. As of my last update, this period was from April 1, 2016, to March 31, 2017.
- Affordable housing: Section 80EEA was introduced to provide additional tax benefits to individuals buying affordable housing properties.
- First-time homebuyer: Similar to Section 80EE, the taxpayer must be a first-time homebuyer to claim the deduction under Section 80EEA.
- Maximum deduction: Under Section 80EEA, first-time homebuyers can claim an additional deduction of up to Rs. 1.5 lakh on the interest paid on a home loan during a financial year. This deduction is over and above the deductions available under Section 24 and Section 80EE.
- Property value and loan amount limit: The value of the property for which the loan is taken should not exceed Rs. 45 lakh. Additionally, the loan amount should not exceed Rs. 25 lakh.
Some other conditions to note:
You may also note below pointers and avail benefit
- The tax exemption is applicable only when construction of the property is complete, or you purchase a ready-to-move-in house
- Enjoy these tax benefits on home loans every year and save a significant amount
- If you sell off the property within 5 years of its possession, the claimed benefits are reversed and added to your taxable income
- You may purchase the property and let it out on rent. In that case, there is no maximum interest deduction applicable
- When availing the home loan, if you continue to rent another house where you presently reside, you can claim tax benefits against HRA as well
Please note that tax laws and provisions may change over time due to budget announcements or amendments in tax regulations. Therefore, it is essential to verify the latest provisions and consult a tax professional to understand the most up-to-date tax benefits applicable to your specific circumstances.
Tax Benefits on Home Loan: FAQs
In case of a joint home loan, both borrowers can enjoy tax benefits on his/ her taxable income individually. This includes a maximum of Rs. 2 lakh on the interest paid and up to Rs. 1.5 lakh on the principal amount.
Any family member, friend, or even the spouse can be a co-borrower of a joint home loan from Bajaj Finserv. The only condition is that every applicant of the housing loan must be a co-owner of that residential property.
If you take a second home loan to purchase another property, tax benefits are applicable on the interest paid. Here, you can claim the entire interest amount paid as no cap is applied.
This welcome change was introduced by the Union Budget of India (FY19-20). It allows an individual to claim a second home as self-occupied property and save more on taxes.
The process to claim tax benefits on a home loan is easy and simple.
- Make sure that the residential property is in your name. In case of a joint home loan, ensure you are the house’s co-owner
- Calculate the total amount that you can claim as a tax deduction
- Hand over the home loan interest certificate to your employer for adjusting the TDS
- If you fail to follow this step, file your IT returns
Self-employed borrowers need not submit these documents. However, they must keep these handy if a query arises in the future.
The maximum tax deductible for a home loan is listed below under specified sections of the Income Tax Act 1961.
- Up to Rs. 2 lakh u/s 24 for self-occupied house; no limit for non-self-occupied house
- Up to Rs. 1.5 lakh u/s 80C
- Up to Rs. 1.5 lakh u/s 80EEA for first-time home buyers
A person who has purchased a new house for self-occupation or to rent out can claim tax exemption on home loans u/s 24, 80C and 80EEA of the Income Tax Act, 1961. You can also claim tax benefits if you are a co-owner of the house or a co-borrower.
Yes, you can claim home loan tax benefits for a property under construction u/s 24. The following rules apply to such a deduction.
- If the construction is completed within 5 years, a deduction of Rs. 2 lakh is applicable
- For constructions not completed within 5 years, only up to Rs. 30,000 is deductible
Premiums paid for a home loan protection insurance plan are tax deductible under section 80C of the Income Tax Act, 1961 only if the borrower makes repayment. Under specific circumstances, where the lender finances such an insurance plan and the borrower repays via loan EMIs, deductions are not allowed.
A home loan top-up is eligible for tax deduction u/s 24(b) and 80C only if it is used for:
- Acquisition/ construction of a residential property
- Renovation or repair of such property
Such a claim should also be backed up with valid receipts and documents.
An income tax calculator is one of the best tools to compute the tax benefits without any hassle. It is an online tool that instantly calculates the amount based on certain home loan details. Some of these include home loan amount, rate of interest, existing tax deductions, and gross annual salary. Simply enter the details required and check the tax benefits that you can avail.
Yes, in addition to the deductions of up to Rs. 1.5 lakh on principal repayments, homet buyers can get extra tax benefit on the interest payments.
The maximum housing loan tax benefit is Rs. 1.5 lakh on principal payment. Here, claims can include registration charges or stamp duty as well.
As per Section 80, EEA, and the government initiative of ‘Housing for All,' home loan interest deductions were allowed, starting from the year 2021 or FY 2021-22.
From April 2022, new income tax rules apply: First-time home buyers will not be eligible to receive tax benefits under Section 80 EEA on new housing loans sanctioned in FY23 as the special benefits announced in Budget 2019 expired on March 31, 2022.
If an applicant satisfies the requirements of both Sections 80EE and 24 of the I-T Act, they must first exhaust the limit under Section 24, then claim benefits of home loan interest deduction under Section 80EE.
Joint home loan borrowers can claim individual home loan rebates in income tax up to Rs. 2 lakh on interest paid and Rs. 1.5 lakh on the principal amount.
In India, taxpayers can claim tax deductions on home loan interest under Section 24(b) of the Income Tax Act. This deduction is available for self-occupied properties that are completed within five years and for which the loan was taken for acquisition or construction. The maximum deduction available under Section 24(b) is Rs. 2 lakh.
In addition to Section 24(b), there is a separate deduction available under Section 80EEA for interest paid on affordable housing loans. This deduction is available for properties with a stamp duty value of Rs. 45 lakh or less, and the loan must have been sanctioned before March 31, 2024. The maximum deduction available under Section 80EEA is Rs. 1.5 lakh.
It is important to note that the overall deductions on home loan interest, including both Section 24(b) and Section 80EEA, cannot exceed Rs. 2 lakh for a self-occupied property. However, for let-out or deemed to be let-out properties, there is no upper limit on the interest deduction. To ensure accurate information and proper tax planning, it is recommended to consult with a tax advisor or refer to the latest guidelines issued by the Income Tax Department.
Here is a table summarizing the tax deductions available for home loan interest in India:
Up to Rs. 2 lakh
Property must be completed within 5 years and loan must be taken for acquisition or construction.
Up to Rs. 1.5 lakh
Affordable housing property
Stamp duty value of the property must not exceed Rs. 45 lakh and loan must have been sanctioned before March 31, 2024.
You can claim both Section 24 and Section 80EE deductions simultaneously if you meet their eligibility criteria.
- Under Section 24, you can claim up to Rs. 2 lakh deduction on home loan interest for a self-occupied or rented property, subject to conditions.
- Under Section 80EE, first-time homebuyers can claim an extra deduction of up to Rs. 50,000 on home loan interest, over and above Section 24, with specific conditions:
- The homebuyer should be a first-time buyer
- Property value should not exceed Rs. 50 lakh
- Loan amount should not exceed Rs. 35 lakh
- The loan should be sanctioned between specific financial years notified by the government