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Home Loan Tax Deductions_WC

Income Tax Benefits for a Home Loan

Your Home Loan not only helps you secure the funds you need to buy a residential property of your choice, it also enables you to receive income tax rebates and exemptions. The Government of India extends these Home Loan tax benefits to incentivise and boost property purchase across the country. To ensure that you apply under the correct tax provision, you should know the different parameters that make you eligible for exemption.

One should identify which components of their Home Loans can be taxed and which can be eligible for a rebate. Simply put, you can avail of an exemption on your Home Loan principal and the interest payments under Section 80C and Section 24(B). Here is a glimpse of all the tax rebates offered on Home Loans before we go into further details.

Deduction Applicable on Income Tax Section Maximum Deduction (in Rs.)/p.a. Parameters
Home Loan Principal 80C 1.5 Lakh A residential property bought through a Home Loan cannot be sold within the first 5 years of possession.
Home Loan Interest 24B 2 Lakh The funds procured through a Home Loan must be used for the purchase or construction of a residential property, and the construction must be completed within 5 years from the end of the financial year, in which the loan amount was disbursed.
Home Loan Interest 80EE 50,000 The funds procured through a Home Loan cannot exceed Rs.35 Lakh, and the value of the property cannot exceed Rs.50 Lakh.
Stamp Duty Charges 80C 1.5 Lakh The stamp duty calculated on the property has to be claimed within the same year in which the expense was incurred.
Joint Home Loan Principal and Interest 80C and 24B 1.5 to 2 Lakh The tax benefits on a Joint Home Loan can be availed by all, only if they are also the joint owners of the property. Alongside that, beneficiaries must also contribute toward the Home Loan repayment as a co-applicant.
Note that tax benefits can be claimed only in the year in which the construction of the property has been completed.

Deductions Permitted on Home Loan Interest Payment_WC

Deductions Permitted on Home Loan Interest Payment

Following are the ways in which you can save your Income Tax payable, on your Home Loan interest payments every year:

Section 24B

  • The interest claimed under Section 24B can go up to Rs.2 Lakh for self-occupied properties.
  • The interest paid on a Home Loan for a rented residential property can be claimed without any upper limit; claims can only go up to only Rs.2 Lakh under ‘Housing Properties’ in a year
  • The interest claimed under Section 24B has to be calculated on an accrual basis, which means that even if you don’t actually pay the amount that year (in case of a moratorium), you can still claim the amount as a deduction.
  • Joint Home Loan Borrowers can claim a rebate of up to Rs.2 Lakh each, provided they contribute to the EMI payments, and are the co-owners of the property.
  • A certificate detailing the Home Loan interest calculations from the lender is mandatory to claim the deductions.
  • In the case of an under-construction property, the construction work must be completed within 5 years of borrowing the Home Loan amount.
  • Interest deductions on an under-construction property can begin from the year the construction has ended.
  • The interest deduction will be restricted to Rs.30,000 if the construction of the property is not completed within the first 5 years of borrowing the Home Loan.

Note that homebuyers who have funded the purchase of their property out of their own pocket are also eligible for claims under Section 24B (not applicable on self-occupied properties).

Section 80EE

  • Tax benefits under Section 80EE can be claimed only after exhausting the interest waivers under Section 24B.
  • The Home Loan interest rebates under 80EE can be claimed by first-time homebuyers only.
  • The Home Loan amount cannot exceed a valuation of Rs.35 Lakh, and the property’s value cannot exceed Rs.50 lakh.

Deductions Permitted on Home Loan_WC

Deductions Permitted on Home Loan Principal Payment

Listed below are the tax provisions under which you can claim benefits for the principal component of your Home Loan repayment: 

Section 80C

  • ​The maximum deductions claimed under Section 80C cannot exceed Rs.1.5 Lakh.
  • In the case of Joint Home Loans, all borrowers can claim Rs.1.5 Lakh individually if they all contribute toward the Home Loan EMI and are co-owners of the property.
  • Spouses who wish to claim a deduction under section 80C must also be co-borrowers and co-owners of the property.
  • Claims under Section 80C are given on a payment basis, which means that beneficiaries should have made a home loan principal amount payment as a part of their Home Loan repayment, in order to seek the benefit. It is not calculated upon projections.
  • Home Loans taken for the construction of a new residence will only eligible for a rebate if the construction is completed within 5 years of taking the Home Loan principal.
  • The property for which the Home Loan claims have been made, cannot be sold within the first 5 years of possession. If the property in question is sold, all tax subsidies will be reversed and considered as income.
  • Stamp Duty and property registration charges can also be claimed under Section 80C, provided it is done in the same year the costs were borne. However, the claim must fall within in the Rs.1.5 Lakh limit that is extended under Section 80C.

Home Loan Tax Deductions: FAQs

Home Loan Tax Benefits: FAQs

The eligibility criteria for claiming tax benefits on your Home Loan repayment are simple enough – one must have borrowed a Home Loan and be the legal owner of the residential property. In the case of a joint Home Loan, everybody must be equal co-borrowers and co-owners, including spouses.

Yes, a Home Loan borrower is eligible for tax subsidies, if their property is under-construction, with certain things to keep in mind:

  • The property construction must be completed within 5 years of seeking the Home Loan amount
  • Tax exemptions for an under-construction property is valid only on the interest component of the Home Loan
  • Pre-construction interest paid during the time the property was under-construction can be claimed within 5 instalments after receiving possession

Yes, you can. If your Home Loans meet all the required tax deduction norms, you are eligible to claim tax benefits for two simultaneous Home Loan repayments. However, note that both houses will be considered self-occupied, and cannot exceed the exemption limit under each category.

Home Loan interest deductions are considered under Section 24B, with the following considerations:

  • Up to Rs.2 Lakh for self-occupied properties
  • No limit on claim, for rented residential properties*

*Terms and conditions apply

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