Are Home Improvement Expenses Tax Deductible? A Guide for Homeowners in India

Home improvements often become necessary, whether for increasing comfort, making structural changes, or simply upgrading an old property. While these upgrades can increase your property's value and quality of life, homeowners may wonder if home improvement expenses are tax deductible. 

This blog explains how tax benefits can be availed on home improvement-related expenses, especially when financed through Top-up Loans on existing Home Loans. 

What Are Home Improvement Tax Deductions?

Tax deductions on home improvement expenses refer to the possibility of reducing your taxable income by claiming the costs incurred in modifying, renovating, or expanding a property.  

In India, home improvement expenses made through Top-up Loans on an existing home loan may be eligible for tax deductions under specific provisions of the Income Tax Act, 1961. This means that if you have taken a Top-up Loan from your lender and used the funds for home improvement, the interest paid on that loan can be claimed as a deduction under Section 24(b). 

Types of Qualifying Home Improvements

If a Top-up Loan is availed of for home improvements, such as structural repairs and renovations, room additions or extensions, roof repairs or replacements, or remodelling with structural changes, you may be able to claim interest paid under Section 24(b) of the Income Tax Act, 1961. You can claim a maximum deduction of up to Rs.30,000 per financial year if the property is self-occupied. 

Types of Non-Qualifying Home Improvements

Cosmetic or lifestyle upgrades that do not impact the property's structure or utility are usually not considered eligible for tax deductions. These include painting and wallpapering, the purchase of furniture, or temporary fixtures.  

Home improvement loans are tax-deductible in India under specific conditions. When funded through a Top-up Home Loan and used for approved renovations or structural upgrades, the interest portion may qualify for deductions under Section 24(b).