Home loan tax benefits are a huge relief for home buyers as property costs are constantly on the rise. Whether you are a first-time home buyer or planning to invest in affordable housing, the Indian government provides attractive tax deductions on a home loan, primarily to encourage the purchase and ownership of residential property. These benefits can be availed on both the principal as well as the interest component of your home loan.
Home Loan Tax Benefits in India#
Under Section 80C, you can claim a home loan tax benefit up to ₹ 150,000 on the repayment of the principal component of your home loan. However, the property must not be sold within 5 years from the date of possession.
Further, Section 80C also allows you to get a one-time tax deduction on stamp duty and registration charges, which can be claimed in the year of registration.
You can avail a tax deduction on the interest component under Section 24(b) of the Income Tax Act. The maximum deduction on self-occupied property (i.e .property where you or your family resides) can be ₹ 200,000. In the case of let-out property (i.e. property given out on rent), there is no maximum limit on the deduction.
Please note that loss from house-property can be set-off against other income upto ₹ 2 lakhs and unabsorbed loss is allowed to be carried forward for eight years for set-off.
Section 80EE & 80EEA (for first-time homebuyers)
In the case of first-time homebuyers, an additional ₹ 50,000 can be claimed on the interest payable under section 80EE. As per Budget 2019, Section 80EEA was introduced pursuant to which the affordable housing tax deduction limit was enhanced to ₹150,000.
Here are a few eligibility factors to keep in mind when availing a tax benefit under Section 80EE or 80EEA:
Section 80EE/80EEA offer tax benefits on the interest component of your home loan. However, there is an eligibility criterion for availing the benefit of section 80EE and 80EEA.
• First-time homebuyers:
Only an individual buying his or her first residential property can claim tax benefits under section 80EE & 80 EEA.
• Affordable housing:
The property value should not exceed ₹ 50 lakhs. Further, the loan amount must be within ₹ 35 lakhs. (Sec. 80EE)
Similarly, Stamp duty value of property should not exceed ₹ 45 lakhs. (Sec. 80EEA)
• Loan sanction period:
Section 80EE - must be between April 1, 2016, and March 31, 2017
Section 80EEA - must be between April 1, 2019 and March 31, 2022.
• Above tax deduction claimed under one section in respect of Interest payment cannot be claimed under other section.
Apart from the above essential tax exemptions, Indian Tax law provides additional benefits to home loan borrowers.
• Joint Home Loan
If you borrow a joint home loan, every individual borrower can avail their respective tax benefits. They are eligible to claim tax deductions on principal and interest components in proportion of EMI payment (up to max. ₹ 150,000 and ₹ 200,000), respectively. However, each individual needs to be a co-owner of the said residential property.
• Second Home Buyers
Under Section 80C of the Income Tax Act, a maximum of ₹ 1.5 lakh deduction is applicable on your principal repayment amount. The deduction amount remains the same in the case of a second home.
L&T Finance offers affordable home loans with attractive interest rates to finance your dream home. Learn more about the quick and easy application and approval, simple documentation and KYC, and more inclusive eligibility.
# The above tax benefits are as per the Income tax Act, 1961 read with the Rules. The said deductions shall not be available for individuals opting for new tax regime.