Home Loan Tax Benefit – Claim Your Income Tax Deduction on Home Loan

If you are planning to buy a house on Home Loan then you should know the Home Loan Tax Benefit. Because of a home loan offers you benefits on your Income Tax deductions.

Buying your own house is a dream come true for you and everyone. To invest in the house the Indian government has always shown a great partiality to support citizens. Under section 80C a home loan is eligible for a tax deduction. A home loan comes with multiple tax benefits when you buy a house, its significantly reduce your tax outgo.  Many schemes by the Indian Govt like Pradhan Mantri Jan Dhan Yojana and etc are flashing green light on the Indian housing sector by determined to bring down the issues of affordability and accessibility.

Must Read: Documents Required for Home Loan

If you are paying EMI for the housing loan there are two components:

  • Interest payment
  • Principal repayment

You can use our Home Loan EMI Calculator to calculate EMI for your Home Loan.

Home Loan Tax Benefit under IT Act

Sections of the Income Tax Act that provide tax rebate on home loan:

Sections in the IT Act Nature of home loan deduction in income tax Maximum amount deductible
Section 80C Tax deductions on the principal repayment ₹ 1.5 Lakh
Section 24 Tax deductions on the interest amount payable ₹ 2 Lakh
Section 80EE Additional home loan interest tax benefit for first-time homebuyers ₹ 50,000

Details explanations of Home Loan Tax Sections

Sections in the IT Act

Nature of home loan deduction in income tax

Section 80C

Claim a maximum home loan tax deduction of up to ₹ 1.5 Lakh from your taxable income on the principal repayment.

This may include stamp duty and registration charges as well but can be claimed only once.

Section 24

Enjoy maximum deductions of up to ₹ 2 Lakh on the interest amount payable.

These deductions apply only for these properties whose construction is finished within 5 years. If it doesn’t finish within 5 years, you can claim only up to ₹ 30,000.

Section 80EE

1st time home buyers can claim an additional ₹ 50,000 on the payable interest every financial year.

The Home Loan amount must not be more than ₹ 35 Lakh.

The property’s value must be within ₹ 50 Lakh.

Through this article, we will discuss more home loan tax benefit and you will gain a lot of knowledge about these all things:-

Deduction for Interest Paid on Housing Loan

A home loan mostly taken for the build/purchase of a house and the construction must be completed within five years from the end of the financial year in which loan was taken. Under Section 24 the interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of ₹ 2 lakh. The maximum deduction for interest paid on Self Occupied house property is ₹ 2 Lakh from Assessment Year 2018-19 onwards. For let out property, there is no upper limit for claiming interest. However, the overall loss one can claim under the head of House Property is restricted to ₹ 2 lakh only. From the year in which construction of the house is completed this Deduction can be claimed.

Must Read: Home Loan Interest Rates & Loan against LIC Policy

Deduction in respect of interest paid towards home loan during Pre-Construction/ Under Construction period

Similar Deduction is not available on principal repayment under Section 80C, for payments done during pre-construction /under construction period. Total interest paid during the under / pre-construction period can be claimed as tax-deductible in 5 equal EMIs during 5 successive years from the year in which construction is completed and the property is handed over to you. Total allowable deduction stands capped at ` 2 lakh per year for a self-occupied house. Starting from the current Annual Year 2018-19 and as applicable for Financial Year 18-19 (Annual Year 19-20), a limit of ` 2 lakh has been placed on the amount of total interest that can be claimed against income from let out or deemed to be let out property.

Prior to this, there was no limit on interest that can be claimed as tax-deductible in case of let out property and deemed to be let out property. Tax deduction during construction time is not allowed for the loan taken for repair or renewal of a residential property.

What are the Tax Deductions on a Joint Home Loan?

If the home loan that you have taken is in joint names then you can save more tax as compared to when you have taken home loan individually.

In case of a home loan jointly, every borrower can enjoy tax benefits on a joint home loan from his/her taxable income individually. Each applicant and co-applicant can separately claim a maximum tax deduction of ₹ 1.50 lakh per annum for principal repayment under Sec-80C and ₹ 2 lakh per annum for interest payment, under Sec-24. However, the total tax benefit by all joint owners cannot exceed the total principal repayment and interest payment during the year.

GST cut from 12% to 8% on houses under PMAY Pradhan Mantri Awas Yojana

The Indian Govt & GST council has decided to reduce GST rates 8%, down from 12% for homes purchased under the Pradhan Mantri Awas Yojana (PMAY) or Credit Linked Subsidy Scheme (CLSS), starting 25th of January.

Under/Pre-construction homes that are a part of CLSS will now be charged GST at 8 %, down from 12 %. Those eligible for CLSS under PMAY will be eligible for home loan tax benefits. The inputs and the capital goods used in the construction of houses attract a GST of 18% or 28%. As opposed to this, the affordable housing projects will now be charged 8% after deducting one-3rd of the amount charged for the house towards the cost of land. The Good Service Tax will help both buyers and builders after lowering. The lowering of GST will help both buyers and builders. The builders or developers now have enough incentive to comply with the system, while the tax burden on borrowers stands reduced.

Additional deduction under section 80EEA

The budget 2019 has introduced additional deduction under Section 80EEA for home buyers for maximum up to Rs 1,50,000. To claim this deduction, the stamp value of the property does not exceed Rs 45 lakhs. The home loan must have been sanctioned between 1st  Apr 19 to 31st  March 20. And on the date of sanction of Home loan, individual doesn’t own any other house. The individual should not also be eligible to claim deduction under section 80EE.

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