Housing Loan Tax Benefits: Overview
Individuals can avail of various tax benefits on their Home Loans under the Income Tax Act, 1961. To save a significant amount of funds on your tax payments, it is important to understand the various tax deductions available.
Tax Benefits on a Home Loan FY 2023-24 (AY 2024-25)
You can claim tax exemptions on both the components of your Home Loan, namely the principal and the interest component. Here is the list of tax benefits homebuyers can claim under various under the old tax regime:
1. Section 24(b) of the Income Tax Act: This section allows a deduction on the interest paid for a self-occupied property. Tax exemption of up to Rs.2 Lakh can be claimed.
2. Section 80C of the Income Tax Act: This section allows a deduction of up to Rs.1.5 Lakh on the principal repayment of the Home Loan.
3. Section 80EE of the Income Tax Act: Under this section, first-time homebuyers can claim additional tax benefits of up to Rs.50,000 on the Home Loan interest component. However, one must not have any property in their name at the time of sanctioning a Home Loan.
To sum up, you can avail of an exemption on your Home Loan principal and the interest payments under Section 80C and Section 24(b).
Home Loan Tax Exemption Under Different Sections in FY 2023-24
The Home Loan tax benefits under the applicable sections of the Income Tax Act, 1961 are given below:
| Deduction Applicable on | Income Tax Section | Maximum Deduction (in Rs.)/p.a. | Parameters |
|---|---|---|---|
| Home Loan Principal | 80C | 1.5 Lakh | A residential property financed by a Home Loan cannot be sold within the first 5 years of possession. |
| Home Loan Interest | 24(b) | 2 Lakh | The funds procured through a Home Loan must be used for the purchase or construction of a residential property. 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 24(b) | 1.5 Lakh and 2 Lakh (respectively) | 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 financial co-applicant. Note that tax benefits can be claimed only in the year in which the construction of the property has been completed. |
Also Read: Know About Income Tax Slabs
Eligibility Criteria for Housing Loan Tax Benefits
Home Loan tax deduction is applicable for residents and NRI individuals. It is not applicable for HUF (Hindu United Families), AOP, a company, or any other kind of taxpayer who is not an individual.
Here are other eligibility criteria according to the respective sections:
| Section | Criteria |
|---|---|
| Section 24(b) | |
| Section 80C | |
| Section 80EE | |
Tax Deductions on Interest Paid on Home Loan
Following are the ways in which you can save the income tax payable on your Home Loan interest payments every year:
Tax Benefits Under Section 24(b)
- The interest claimed under Section 24(b) 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 24(b) 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 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 24(b) (not applicable on self-occupied properties).
Tax Benefits Under Section 80EE
- Tax benefits under Section 80EE can be claimed only after exhausting the interest waivers under Section 24(b)
- Tax Exemption under 80EE for a housing loan 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
Tax Deductions on Home Loan Principal Repayment
Listed below are the tax provisions under which you can claim benefits for the principal component of your Home Loan repayment:
Tax Benefits Under 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 be 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 the Rs.1.5 Lakh limit that is extended under Section 80C
*Terms and conditions apply.
Home Loan Tax Benefits for Women Homebuyers
Conditions for claiming housing loan tax exemption as a women homebuyer
Women homebuyers who have availed Home Loans or joint Home Loan are eligible for tax benefits. As per the old tax regime, in a joint Home Loan between a man and a woman, the woman can avail tax deductions separately. As a co-owner of property, she can claim IT deductions on both, principal and interest amounts.
According to Section 80C of the Income Tax Act, co-applicants can avail a benefit of up to Rs.1.5 Lakh each a year on the principal amount, and up to Rs.2 Lakh each on the interest paid. These concessions offered to women largely reduce the cost of buying a home.
Under the old tax regime, a first-time woman homebuyer can claim Rs.50,000 deduction on the principal, in addition to other claims under Section 80EE.
Home Loan Tax Benefits for Senior Citizens
Conditions for claiming Home Loan tax exemption as a senior citizen
According to the law, a senior citizen is an individual resident between the age group of 60 and 80 years at any time during the respective financial year. A super senior citizen is above 80 years of age. To claim tax benefits as senior citizens, you should fulfil the above age criteria.
How to Claim Income Tax Benefits on a Home Loan?
You can claim income tax rebates on your ongoing Home Loan by following these steps:
- Calculate the tax deduction that you are eligible for.
- Ensure that you have all the documents required to prove the ownership of the property along with a Home Loan certificate with interest and principal details .
- Submit your Home Loan interest certificate to your employer to adjust TDS.
- Claim the deductions by visiting the official website of the Income Tax Department.
- Download your tax statement for verification.
*Terms and conditions apply.
Housing Loan Tax Benefits: FAQs
The eligibility criteria for claiming tax benefits on your Home Loan repayment are simple – 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 claim tax benefits on two Home Loans. 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 the exemption limit cannot be exceeded in either category.
Home Loan interest deductions are considered under Section 24(b), 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.
You can avail a maximum deduction of Rs.30,000 on a Home Loan Top-up if you have receipts and documents proving that the Top-up Home Loan has been used for acquisition/ construction/repair/renovation of a residential property. The limit of Rs 30,000 is available for a self-occupied house only. In case repairs and renovations have been done on a let-out property, no deduction can be claimed.
You can use an Income Tax Calculator to calculate your maximum benefits on your Home Loan. For example, let’s say you pay out Rs.4,80,000 as interest and Rs.1,20,000 as principal amount in a year. This means, if according to your salary slab, you are paying a tax of Rs.2,32,500, then you can reclaim Rs.96,000 from your tax as a benefit.
Sections 80EE and 80EEA of the Income Tax Act, 1961 provide tax benefits to eligible individuals on the interest paid towards Home Loans. Here are the eligibility criteria for both sections:
80EE:
The eligible candidate is a first-time homebuyer whose Home Loan amount is less than Rs.35 Lakh and the stamp value of the property is within Rs.50 Lakh. Also, the Home Loan should have been sanctioned between April 1, 2016, and March 31, 2017. Note that only individual buyers are eligible.
80EEA:
The eligible candidate is a first-time homebuyer whose Home Loan amount is less than Rs.25 Lakh and the stamp value of the property is within Rs.45 Lakh. Also, the Home Loan should have been sanctioned between April 1, 2019, and March 31, 2022. Note that only individual buyers are eligible.
Please note that these criteria may change over time and it is advisable to check the latest rules before applying for any tax benefit.
Section 80EE: Section 80EE is a Home Loan interest deduction section that allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. The deduction limit is Rs.50,000 and can be claimed only by individual borrowers.
Section 24(b) of the Indian Income Tax Act, 1961 provides for deductions that can be claimed by taxpayers on the interest paid on a Home Loan for a self-occupied property or on the rental income received from a property.
The deductions available under Section 24(b) are as follows:
Interest on Home Loan: A taxpayer can claim a deduction on the interest paid on a Home Loan taken to purchase, construct, repair, or renovate a self-occupied property. The maximum deduction allowed under this section is Rs.2 Lakh per annum.
Interest on Loan for Let-out Property: A taxpayer can also claim a deduction on the interest paid on a loan taken to purchase, construct, repair, or renovate a property that is let out. There is no upper limit on the amount of deduction that can be claimed.
First, you can exhaust your deductible limit under Section 24(b) of Rs.2 Lakh, then go on to claim the additional benefits under Section 80EE.
Yes, if you meet the eligibility conditions for both, you can claim deductions under both Section 24(b) and Section 80 EEA. However, the total deduction claimed under both sections cannot exceed the actual amount of interest paid on the Home Loan during the financial year.
Section 24(b) and Section 80EE are two different provisions under the Indian Income Tax Act, 1961 that allow taxpayers to claim deductions on the interest paid on a Home Loan. The key differences between these two provisions are as follows:
Eligibility: Section 24(b) is applicable to all taxpayers who have taken a Home Loan to purchase or construct a self-occupied property, while Section 80EE is applicable only to individual taxpayers who are first-time homebuyers.
Quantum of Deduction: Under Section 24(b), a taxpayer can claim a deduction of up to Rs.2 Lakh per annum on the interest paid on a Home Loan. On the other hand, under Section 80EE, a taxpayer can claim an additional deduction of up to Rs.50,000 per annum on the interest paid on a Home Loan.
Time Period: Section 24(b) allows a deduction for the interest paid on a Home Loan in any financial year, while Section 80EE is applicable only for Home Loans taken between 1st April 2016 and 31st March 2017.
Conditions: Under Section 24(b), there are no specific conditions to be fulfilled to claim the deduction, except that the Home Loan should have been taken to purchase or construct a self-occupied property. However, under Section 80EE, the following conditions must be fulfilled to claim the deduction:
a. The taxpayer must be a first-time homebuyer.
b. The value of the property purchased should not exceed Rs.50 Lakh.
c. The Home Loan taken should not exceed Rs.35 Lakh.
d. The loan should have been sanctioned between 1st April 2016 and 31st March 2017.
In summary, Section 24(b) is a more general provision that allows deductions on the interest paid on a Home Loan, while Section 80EE is a specific provision that provides additional deductions to first-time homebuyers meeting certain conditions.
The maximum income tax exemption on a Home Loan in India is the sum of the deductions that can be claimed under Section 24(b) and Section 80EEA, subject to the conditions mentioned above. Currently, the maximum housing loan tax exemption in India is Rs.3.5 Lakh per annum.
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