Taking a home loan can help you save tax according to the provisions of the Income Tax Act, 1961. In this article we will discuss the tax benefits available under the act.
The repayment of Home Loan comprises of two components:
1. Repayment of Principal and
2. Repayment of Interest
As the repayment consist of two various components, the tax benefit on home loan is taking care by various sections of the IT Act.
These are the benefits available on Home loan taken which can be claimed as deductions in the Income Tax Return:
1. Principal Repayment Deduction: The amount paid as home loan’s principal repayment deduction of Principal taken by an Individual/HUF is allowed as deduction under section 80C. The maximum deduction allowed under section 80C is INR 1.50 lacs. This deduction is available on payment basis. For claiming this principal repayment deduction, the house property must not be sold within 5 years of possession. Or else, the deduction claimed earlier will be added back to the total income in the year of sale.
2. Deduction for Stamp Duty Charges & Registration Charges: Under section 80 C the deduction for stamp duty and registration charges paid on the purchase of house property can also be claimed under section 80C but within the overall limit of INR 1.50 lacs. It can be claimed only in the year in which these expenses are happened.
3. Deduction of interest on Home loan: As per Section 24, maximum deduction for Interest payable on Loan is INR 2 lacs where the loan has been taken on or after 01 April 1999 for the Purchase of a self-occupied Property or Construction of a self-occupied Property and the property has been acquired or constructed within five years from the year in which loan was taken. The maximum tax deduction allowed under section 24 of interest on loan on a self-occupied property is INR 30 thousands where the loan was taken before 01 April 1999 or the loan was taken for reconstruction, repair or renewal. There is no maximum limit if the house property for which the Home Loan has been taken is not self-occupied & the taxpayer can take deduction of the full interest amount.
4. Additional deduction of interest: Under section 80EEA the additional deduction of interest on home loan taken from any financial institution, is available to individuals up to a maximum limit of INR 1.50 lacs provided the following conditions are satisfied:
- The stamp value of the property does not more than INR 45 lacs.
- The home loan should have been sanctioned between the dates 1st April 2019 to 31st March 2021.
- On the loan sanction date, the individual does not own any other residential house property.
5. Additional deduction of interest under section 80EE: Additional deduction of interest on home loan taken from any financial institution, is available to individuals up to maximum limit of INR 50 thousands provided the following conditions are satisfied:
- The value of residential house property does not exceed 50 lacs rupees.
- The loan should have been sanctioned between the dates 1st April 2016 to 31st March 2017.
- The amount of loan sanctioned for acquisition of the residential house property does not exceed 35 lacs rupees.
On the loan sanction date, the individual doesn’t own any other residential house property.
Summary
| Section | Nature | Maximum Deduction | Conditions |
| 24 | Interest | INR 2 Lacs | Construction must be completed within 5 yrs. from the end of Financial Year in which home loan had taken. |
| 80C | Principal | INR 1.50 lacs | Property should not be sold within 5 years of possession. |
| 80C | Stamp Duty | INR 1.50 lacs | Claim is allowed in the year of expense incurred. |
| 80EE | Interest | INR 50 thousads | Property Value should not INR 50 lacs and the loan amount should not exceed INR 35 lacs. |
| 80EEA | Interest | INR 1.50 lacs | Stamp value of property should not exceed INR 45 lacs and deduction under section 80EE must not be claimed. |