Income Tax Benefit on Home Loan (FY 2023-24)

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Income tax benefit on home loan is available under 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 claim deductions 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. Homeowners can claim the benefits on loans availed till March 31, 2022. 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 2022, no new home loans sanctioned in FY23 will be eligible to claim the tax benefits under section 80 EEA.

Sections of the Income Tax Act for tax rebate on home loan

Sections in the IT Act

Nature of home loan deduction

Maximum amount deductible

Section 80C

Deduction for principal repayment

Rs. 1.5 lakh

Section 24

Deduction for interest paid

Rs. 2 lakh

Types of deductions on housing loans

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 stamp duty and registration charges as well, but can be claimed only once and in the same year that they are incurred

2. Section 24

These are the deductions under Section 24

  • Enjoy maximum deductions of up to Rs. 2 lakh on the interest amount payable
  • These deductions apply only on the property whose construction is finished within 5 years. If it does not finish within this time frame, you can claim only up to Rs. 30,000

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

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.

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Tax Benefits on Home Loan: FAQs

What are the tax deductions on a joint home loan?

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.

Are there home loan tax benefits on a second house?

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.

How to claim tax benefit on a home loan?

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.

What is the maximum amount of tax deductible for a home loan?

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
Who is eligible to claim tax exemptions on home loans?

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.

Can I claim home loan tax benefits on an under-construction property?

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

Is home loan protection insurance tax 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.

Is a top-up loan eligible for tax deduction?

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.

How can I calculate tax benefits on a home loan?

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.

Is home loan interest tax-deductible in 2023- 24?

Yes, on February 1, 2023, in the Union Budget 2023 government extended the additional tax deduction of Rs. 1.5 lakh on interest paid on home loan for the purchase of affordable homes until March 31, 2024.

Purchasing a property is a significant investment decision. To avail the most competitive home loan interest rate along with other benefits, approach Bajaj Finserv.

What is the tax benefit on a housing loan?

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.

Are tax deductions on home loan interest allowed in 2022-23?

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.

Can I claim tax benefits under both Sections 80EE and 24 of IT Act?

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.

Can I claim a home loan tax rebate for a joint home loan?

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.

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