Home Loan Tax Benefit

Buying a house of our own is something that all of us plan to buy at some point in our lives, no matter what. However, with the rising expenses, it often becomes challenging to create substantial savings for buying a home. Thus, to assist individuals like you who are planning to buy a home of your own, there are a number of financial institutions that offer home loans. The best part about taking home loans is that you even get tax exemptions on such loans. Wondering how? Scroll through the section below to learn all about home loan tax benefits.

What are Home Loan Tax Benefits?

The decision to purchase a home involves a lot of financial planning and taking a home loan is one of the most crucial parts of it. But, do you know that there are home loan tax benefits available as per the Income Tax Act of 1961. There are a number of tax benefits that are applicable on home loans as tabulated below:

Let us understand more about these sections and other sections of the IT act that provides tax rebates in the section below: 

Section 80EE

• Tax benefits under section 80EE is only applicable for individuals who are buying home for the first time
• The home loan amount should not be more than Rs. 35 lakhs in order to claim under this section
• The home loan must have been sanctioned between 1st Apr, 2016 and 31st Mar, 2017
• Tax benefit is applicable on the interest amount paid towards home loan and this can be availed till the time of repayment

Suggested read: Section 80EE: Deduction for Interest on Home Loan

Section 24

• The tax benefit is applicable on the interest amount and the maximum tax benefit that can be availed is Rs. 2 lakhs
• The home loan must be taken for the construction of the house and the construction must be completed within 5 years of taking loan
• For let out residential property, there is no limit on tax benefit that can be claimed under section 24
• In case the construction of the house takes more than 5 years, than a maximum of Rs. 30,000 can be availed as tax benefits in the given financial year

Section 80C

• The tax benefits under section 80C is applicable for both rental and self-occupied properties
• A maximum of Rs. 1.5 lakh can be claimed as tax benefit on the repayment of principal amount
• To be eligible to claim exemption, the property should be fully constructed
• In case you decide to sell the property within 5 years of possession, then you cannot claim tax exemption. Moreover, if you do so, then the tax benefits you have claimed till then will be later added to your taxable income
• Tax benefit can also be claimed on the stamp duty and house registration charges, however that should fall within Rs. 1.5 lakh limit 

Section 80 EEA

• Applicable for those buying a house for the first time
• The loan must be taken between 1st Apr, 2019 and 31st Mar, 2022
• The value of the house should not exceed Rs. 45 lakhs
• In case you and your spouse are both the owners of the house, and the loan is jointly paid, then in such case, both will be eligible for claiming tax deduction
• NRIs can also claim tax benefit under section 80 EEA

Joint Home Loan Tax Benefits

• As per section 80C, if both you and your spouse are paying the home loan, then both can claim tax deduction
• The maximum limit that can be claimed by both is Rs. 2 lakhs
• To be eligible for claiming this tax benefit, both you and your spouse needs to be the co-owners of the house 
• In case if any of the spouse does not complete the EMI payment, then the tax benefit shall not be applicable 

Tax Benefits on Under Construction Property

• The Income Tax Act also provides tax benefits for under construction properties
• Individuals can enjoy tax benefits on pre-constructed property which is equivalent to 1/5th of the interest paid, commencing from the date of construction of the house
• A maximum of Rs. 2 lakhs can be claimed on the interest paid towards the under construction property

Second Home Loan Tax Benefits

• The interest amount paid towards home loan can be claimed as tax benefits under Income Tax Act of 1961
• It was after the 2019 Union Budget that taxpayers can now claim tax benefits on second property whether it is self-occupied or not

Tips to Claim Tax Benefits on Home Loan

You can claim home loan tax benefits in a few simple steps as listed below:

• First, collect the interest tax certificate from the financial institution you have taken loan
• You need to submit the interest certificate to your employer or while Income Tax Return or ITR
• Once, you have submitted all the documents, you will be able to claim tax benefits on home loan

Take Away

Thus, now that you know all about tax benefits on home loan, it’s your time to take action and apply for a home loan instantly and enjoy dual benefits. 

FAQs

• What is the amount that is tax exempted under section 80C of Income Tax Act?

As per 80C of the Income Tax Act, you can claim tax benefits of up to Rs. 1.5 lakhs.

• Can I get tax benefits on under construction property?

Yes, tax benefits are also applicable on under construction property.

• Can I get tax benefits on second home loans?

Yes, as per Income Tax Act of 1961, you can also get tax benefits on a second home loan.

• Can I get tax benefits if both spouses are paying home loans?

Yes, both you and your spouse can claim tax benefits if they are paying home loans.