All About Tax Benefits on Home Loans for Self-Employed Individuals

4 min 07 Jun 2024

Highlights

Tax Benefits on Home Loan (Tax Year 2026-27) for Self-Employed Individuals
Eligibility Requirements for Home Loans for Self-Employed Individuals

Aspiring homebuyers can opt for a Home Loan to purchase their dream home. Home Loans offer access to sizeable amounts at competitive interest rates along with a long repayment tenure to make the homeownership experience convenient. Since a housing loan is a long-term commitment, it is advisable to avail of it after proper financial planning. Besides helping you purchase a property, Home Loans also come with several tax benefits that can be claimed under the old tax regime. Let us look at the tax benefits on Home Loans specifically for self-employed individuals.

Tax Benefits on Home Loans (Tax Year 2026-27) for Self-Employed Individuals

If you are self-employed and have availed of a Home Loan, you can avail of the following tax benefits:

Tax Benefits Available Under Section 123 of the Income Tax Act

A Home Loan is repaid in the form of EMIs, which consist of a principal and an interest component. While self-employed Home Loan borrowers can claim deductions on both components, Section 123 allows borrowers to claim tax benefits on Home Loans, particularly on the principal component. Borrowers can enjoy a deduction of up to Rs.1.5 Lakh per annum on both self-occupied and let-out properties. Further, one can also claim a one-time deduction on the stamp duty and registration charges (in the year in which they were incurred) under this section of the Income Tax Act, 2025.

Tax Benefits on Home Loans Under Section 22 of the Income Tax Act

Home Loan borrowers should know that Section 123 of the Income Tax Act, 2025, deals with several different tax-saving instruments. However, Section 22 of the Income Tax Act deals with only the interest component of the Home Loan. Under this section, self-employed individuals can claim tax benefits on the interest component of the Home Loan up to a maximum of Rs.2 Lakh. Further, one can claim this deduction on all let-out properties they have. In the case of let-out properties, there is no limit on the deduction that one can avail of. However, if your tax deduction exceeds Rs.2 Lakh, it will be adjusted against other income heads, but the total deduction cannot exceed Rs.2 Lakh in any given financial year.

Tax Benefits on Home Loans in the Case of Affordable Housing

If a self-employed individual invests in an affordable house, they can claim an additional deduction under Section 131 of the Income Tax Act, 2025. This deduction is available over and above the tax deductions on the interest component of the Home Loan under Section 22 of the Income Tax Act. However, to be able to claim this tax benefit, one must meet the following criteria:

The borrower must have availed of the loan between 1 April 2019 and 31 March 2022
The borrower must not have any other property in their name at the time of signing the loan agreement
The value of the property cannot exceed Rs.45 Lakh

Please note that there are no tax benefits on Home Loan (FY 2022-23) under the affordable housing category. Therefore, borrowers cannot claim tax benefits under Section 131 if they have availed of a loan after 2022.

Also Read: Top 5 Ways to Avail of Tax Benefits on Home Loans

In conclusion, self-employed individuals can save a considerable amount of funds through tax benefits. However, a Home Loan is a big-ticket expense, and therefore, one must avail of a Home Loan after assessing their financial profile. Further, borrowers have to meet the eligibility requirements determined by the lender to apply for a Home Loan.

Eligibility Requirements for Home Loans for Self-Employed Individuals

You need to meet the following eligibility criteria to apply for a Home Loan with Bajaj Housing Finance:

Applicant should have at least 3 years of continuity in their current business
Self-employed individuals applying for a Home Loan must be between 25 and 70 years** of age.
Borrowers should ideally have a CIBIL score of 750 or above to be eligible for the best Home Loan deals.

**The upper age limit is considered as age at the time of loan maturity. Additionally, the upper age limit is subject to change, depending on the property profile.

Final Words

Home Loans are big-ticket loans, and therefore, one must avail of these loans after careful financial planning. Use an online Home Loan eligibility calculator to figure out the maximum loan amount you can borrow and repay easily. Further, before beginning the loan application process, go to your lender’s website and go through their eligibility criteria to check whether you qualify or not. Apply only if you qualify for the Home Loan. Also, check the list of documents you will need to provide. Keep these documents ready to experience a smooth loan process. Further, if you have availed of a Home Loan, you can qualify for the tax benefits available to you to save funds.

Also Read: Checklist of Documents Required for Home Loan

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