Home Loan Tax Benefits

Once you apply for a home loan, you are also eligible for tax benefit privileges – making a housing loan not just a means to achieve your dream, but also a medium to seek savings through your income tax returns. 

However, what could get in the way of your tax rebates is the lack of information, and in this article, we have consolidated all the tax benefits having a home loan can make you eligible for and how to avail of these benefits on the income tax portal efficiently.

Current Tax Benefits on a Home Loan 

The below table illustrates the various tax benefits as provided by certain sections of the Income Tax Act, 1961*

Income Tax Act Maximum Deductible Amount
Section 24 Rs.2 lakhs per annum
Section 80C Rs.1.5lakhs per annum
Section 80EE Rs.50,000

*Readers must note that these benefits are extended only on home loans that are availed before March 2022, as per Budget 2022. 

Tax Benefit on Home Loans as Provided by Section 24 

Section 24 of the Income Tax Act lets you access interest deductions on a home loan amount. You can claim interest deductions worth up to Rs.2 lakh provided that your property’s construction is complete. 

Note that the above limit applies to self-occupied properties. If yours is a let-out property, then there is no fixed limit. 

Tax Benefit on a Home Loan as Stated in Section 80C 

This section of the Income Tax Act refers to deductions for the principal amount. Remember, an EMI comprises two parts—the principal amount and the interest component. 

This section provides for deductions of up to Rs.1.5 lakh yearly. Here is a breakdown of the benefits of this section:

  • This benefit applies to self-occupied and let-out properties. You can claim deductions of up to Rs.1.5/lakhs yearly on payments made towards the principal amount. 
  • Certain deductions like stamp duty and registration may be included. However, this is a one-time windfall. 

To claim this benefit, we encourage you to follow these guidelines:

  • You must finish the property’s construction to qualify.  
  • Until five years have passed, you cannot sell the house to claim this deduction. If you sell before the five-year wait, you will have to refund any deduction claimed.

Home Loan Tax Benefit Under Section 80EE

Section 80EE empowers you to take advantage of additional tax benefits. 

This is what you should know about Section 80EE. 

  • You can access tax benefit on the interest component of a home loan. The limit is Rs.50,000/lakhs. 
  • You can access this home loan tax benefit even with the existing deduction of Rs.2 lakh as provided under Section 24(b). 
  • Your property’s value should not exceed Rs.50 lakhs if you want to claim benefits under this section.

What are the Tax Deductions for a Joint Home Loan? 

When you and a spouse or family member apply for home loan, each party qualifies for a deduction on the interest component. The maximum amount is Rs.2 lakh for each party. 

You can also enjoy tax deductions on the principal amount of up to Rs.1.5 lakh each. However, the claimants should be legitimate co-owners of the property. 

How to Determine Tax Benefits on Your Home Loan 

Knowing the exact value of your tax benefits is easy and fast today. To do this, just use an online calculator for home loan tax benefits. Available on lenders’ websites, simply input your answers for the fields listed below. 

  • Loan amount 
  • Tenor 
  • Interest rate 
  • Date the loan started 
  • Gross annual income 
  • Current deduction as provided by Section 80C

How to Apply for Tax Benefits on Your Home Loan 

Below is a guide on how you can claim tax benefits:

  • Determine the exact value of your tax benefits
  • Proceed only if you own the property or are a co-owner 
  • Provide your employer with a home loan interest certificate so they can modify the tax deductible at source. Not doing this leaves filing the tax return as your only option
  • For self-employed individuals, there’s no need to submit the above documents. Simply make them accessible for emergencies

Applying for a home loan has many advantages and saving money by way of tax benefits is one of them. Now that you know the tax benefits associated with a home loan, apply for one now and become a homeowner promptly. 

Also Read: A Complete Guide On Home Loan Tax Benefits