An Income Tax Return (ITR) is a document that taxpayers in India need to file with the Income Tax Department to report their income earned, deductions claimed, and tax paid during a given financial year. Essentially, it acts as a declaration of your earnings so that your tax liability can be assessed and verified. Filing an ITR is mandatory if your income exceeds the exemption threshold, and is done through various ITR forms, as applicable.
When it comes to filing the Income Tax Return (ITR) for Home Loan tax exemptions, it is important to understand the different deductions applicable to you as a borrower. You can claim tax deductions for Home Loans under Section 24(b) and Section 80C for interest payments and principal repayment, respectively. There are other exemptions too that fall under Section 80EE.
When you apply for a Home Loan, you need to submit your Income Tax Returns (ITR). It is used to assess your income stability and repayment ability. It also helps in determining whether you qualify for the loan amount you are seeking.
If you run a business, you will likely be asked to provide audited financial statements as part of the process. For this to happen, your ITR needs to be filed, since it forms the foundation for auditing your financial records.
That said, income alone doesn’t decide your loan eligibility. Lenders also evaluate factors like your age, credit score, credit history, and overall financial profile.
Filing your ITR to claim deductions on your housing loan is simple. It is advisable to keep the necessary documents handy to complete the process of ITR filing easily. The following are the steps to file an ITR:
1: Organise Documents Required for ITR Filing
To file an ITR, you will need the following documents:
- Property ownership documents
- Certificate of purchase or construction
- Home Loan certificate with interest and principal details
- Municipal taxes receipt
- Financial and personal documents of the taxpayer
2: Submit the Documents to Your Employer
- Inform the employer to make TDS adjustments.
- This compliance is not mandatory for freelancers or self-employed Home Loan borrowers.
3: Calculate Your Home Loan Deductions
- Understand the deductions available for both self-occupied and let-out properties.
- Consult with a CA or your financial advisor before making your maximum deduction claim.
4: Claim the Actual Deductions
- Once you have completed all the necessary steps, visit the official website the Income Tax Department. Follow the given instructions and complete your Home Loan tax submission.
- Download your tax statement for verification.
Submitting a duly filed ITR is a key requirement for credit facilities such as a Home Loan. You can easily avail of a Home Loan with Bajaj Housing Finance if you have all the required documentation and meet our basic eligibility terms.
Read Also: Different Types of ITR Forms in India
Tax Benefits on ITR Filing for Home Loan Under Different Sections
If you have availed of a Home Loan, you can claim tax benefits available under these sections of the Income Tax Act, 1961:
Section 24(b):
Under Section 24(b), you can claim a tax deduction on the interest component of your Home Loan. You can claim up to a maximum amount of Rs.2 Lakh in a financial year. However, if the property is rented out, the entire interest component on the principal value shall be allowed as a deduction.
If you have availed of a Top-up Loan for renovation or repair, the maximum deduction is limited to Rs.30,000.
Section 80C:
Under Section 80C, you can claim deductions on the principal repayment of your Home Loan, with a maximum limit of up to Rs.1.5 Lakh. However, you cannot sell your property within five years of possession. Stamp duty and property registration charges are also eligible for deduction under Section 80C, as long as they are claimed in the same year the expenses were incurred. However, the claim must remain within the Rs.1.5 Lakh limit allowed under Section 80C.
Section 80EE:
If you are a first-time homebuyer, you can claim an additional Rs.50,000 as a Home Loan income tax rebate on the interest component, provided specific conditions are met. To be able to claim this deduction, you must be a first-time homebuyer with no other property in your name at the time of sanctioning of the loan. Moreover, the property's value must not exceed Rs.50 Lakh and the loan amount must be within Rs.35 Lakh. Additionally, you must have availed of a Home Loan between April 1, 2016, and March 31, 2017, to be eligible for this deduction.
Section 80EEA:
To be eligible for deductions under Section 80EEA, you must be a first-time homebuyer with a Home Loan amount of less than Rs.25 Lakh. The property value must not exceed Rs.45 Lakh and you must have availed of a Home Loan between April 1, 2019, and March 31, 2022. Also, keep in mind that only individual homebuyers can qualify for this benefit.
Use of Form 16 for Home Loan
Salaried individuals need to submit Form 16 when applying for a Home Loan. Issued annually by your employer, it serves as proof of income and tax paid to the government. It is used to verify your income stability, which plays a key role in determining your Home Loan eligibility, repayment capacity, and the loan amount you may qualify for.
It provides them with a snapshot of your salary structure, deductions, and net taxable income. This information helps them assess whether you can comfortably handle monthly EMIs.
Why Is ITR an Essential Document for a Home Loan?
Submitting Income Tax Returns (ITRs) when applying for a Home Loan is necessary. It is used to understand your actual, declared income and to assess your eligibility. It also helps lenders estimate repayment capacity over the loan tenure.
How to Declare Home Loan in Your Income Tax Return?
Here are the steps to declare your Home Loan in your ITR:
- Before you start, collect key documents such as your interest certificate, principal repayment statement from your lender, and proof of property ownership.
- Know the deductions you can claim. For instance, under Section 24(b), you can claim a deduction for the interest paid on your Home Loan up to Rs. 2 Lakh per year if the property is self-occupied. Under Section 80C, you can claim a deduction for principal repayment up to Rs.1.5 Lakh.
- In your ITR filing, report the interest paid under the ‘Income from House Property’ section and the principal repayment under ‘Deductions’ (Section 80C). Ensure you enter the correct amounts and attach or retain the supporting documents.
Frequently Asked Question
The ITR-1 form, also known as the ITR-1 Sahaj form, is an income tax return filing form to file the income tax. The ITR-1 form is for individuals with a total income not exceeding Rs.50 Lakh. It is most commonly used by salaried individuals. Some of the ineligible applicants for this ITR form include:
- Resident Not Ordinarily Resident (RNOR) and Non-Resident Indians (NRI)
- Individuals having agricultural income greater than Rs.5,000
- Individuals with more than Rs.50 Lakh of income
- Individuals whose income is derived from lottery, legal gambling, racehorses, and so on
- Individuals who have derived their income derived from business or profession
Your ITR helps in determining your cash flow, income, and financial stability. Filing ITR on time poses you as a reliable borrower.
You can claim deductions on both Home Loan interest and principal repayment while filing ITR-1 by reporting them under the relevant sections of the Income Tax Act, 1961. To do so, submit the necessary documents, such as interest certificates.
Salaried individuals with a Home Loan typically need to file ITR-1 (Sahaj), provided their total income is under Rs.50 Lakh and they own only one house property.
Under Section 24(b) of the Income Tax Act, you can claim a deduction of up to Rs.2 Lakh per financial year on Home Loan interest paid for a self-occupied property, provided you reside in that property. If the property is rented out, the entire interest can be claimed for deduction.
In ITR-1 (Sahaj), the home loan interest paid is declared under the ‘Income from House Property’ section of the form.
To claim the interest deduction, obtain an interest certificate from your lender showing the total interest paid. While filling out your ITR, enter this interest amount under ‘Income from House Property’ according to Section 24(b).
You need to keep the following documents handy to claim deductions on your Home Loan:
- Documents establishing ownership of the property
- Proof of property purchase or completion of construction
- Home loan certificate detailing both interest paid and principal repayment
- Receipts for municipal or local property taxes paid
- The taxpayer’s financial records and personal identification documents
Disclaimer
The information remains subject to change depending on the laws and government guidelines, applicable at the time being. However, Bajaj Housing Finance Limited (‘BHFL’) is under no obligation to update or keep the information current. Users are advised to seek independent legal and professional advice before acting on the basis of the information contained in the Website. Placing reliance on the aforementioned information shall always be the sole responsibility and decision of the User and the User shall assume the entire risk of any use made of this information.
In no event shall BHFL or the Bajaj Group, its employees, directors or any of its agents or any other party involved in creating, producing, or delivering this Website shall be liable for any direct, indirect, punitive, incidental, special, consequential damages (including lost revenues or profits, loss of business or loss of data) or any damages whatsoever connected to the User’s reliance on the aforementioned information.
Related Articles
Types of Home Loans Available in India
345 2 min
Home Loan Terminology
421 5 min
Types of Home Loan Charges
369 2 min
