Income Tax Benefits on Home Loan

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Every person dreams to have his own home. It gives us a unique sense of security and satisfaction. The government of India has remained active to encourage people to buy their own homes. To complete people’s dreams, the government is also providing various benefits for the people who want to buy a home, such as tax deductions over home loans under the Income Tax Act section 80C.

To eliminate the problems of affordability and accessibility, the government is also running many cooperative schemes, such as Pradhan Mantri Jan Dhan Yojana. Let’s see a close view of the various tax benefits that one can get from his home loan. Also know more about home loan tax benefits

Deduction on interest paid on a home loan

The home loan has two components, principal payment and interest payment. Under section 24 of the Income Tax Act, you can claim the tax deduction of up to Rs. 2,00,000 over the interest that you’re paying as EMIs to pay off your home loan. However, for the let-out property, the government has not put any cap on the amount that you can claim for a tax deduction.

Deduction on interest paid on a home loan during the pre-construction period

Many times people buy a home that is under construction. That means they can not move into the house, but they still have to pay interest, also known as pre-construction interest, to complete the loan. In this case, the government provides the deduction of five equal instalments to help the borrower right from the starting of the loan. But if these five equal instalments are less than Rs. 2,00,000 combined, then it would be wise to choose a claim for a tax deduction of Rs. 2,00,000.

Benefit on principal repayment

The principal amount that you’re paying as EMI is also available for a tax deduction. From this provision, the maximum amount which you can claim is Rs. 1,50,000. But to avail of this benefit, you cannot sell the property within 5 years, cause this would also add the earlier claimed amount to the principal amount again.

Deduction for Registration and Stamp Duty

Under section 80C, you can also claim a tax deduction of up to Rs. 1,50,000 for registration charges and stamp duty. However, you can only claim for this benefit only in the year in which the expenses have been made.

Additional deduction under section 80EE

Under section 80EE, you can claim the additional tax deduction for up to Rs. 50,000. To avail of this benefit, the total loan amount should not be more than Rs 35 lakhs and the total value of the property should not be more than Rs 50 lakhs. Previously, the Section 80EE was only available for two years period from FY 2013-14 to FY 2014-15, but in FY 2016-17 it was reintroduced by the government to help home loan borrowers. A borrower can only claim for this benefit if he does not own any other house.

Additional deduction under section 80EEA

To extend the tax deduction on home loans further, the government introduced Section 800EEA. Under this provision, you can claim a tax deduction of up to Rs. 1,50,000 only if the stamp value of the purchased property is less than Rs. 45 lakhs. To avail of this benefit, the loan must be taken between 1st April 2019 and 31st March 2020 and you must not own any other house on the date you take the loan. If you claim this tax deduction, you also cannot claim for the tax deduction that comes under section 80EE.

Deduction for Joint Home Loan

In case the loan is taken jointly, then under section 80C of the Income Tax Act, each loan holder can claim the tax deduction of up to Rs. 2 lakh on the home loan interest and up to Rs. 1,50,000 on the principal amount. Also, to claim this benefit, the loan holders should be the co-owners of the house.