To understand the key tax benefits on a home loan, we are bifurcating the repayment techniques into four major elements-tax benefits on principal repaid, tax benefits on interest paid, deduction on pre-construction interest, and section 80EE income tax benefits. The next section will let you know the concept in detail.
Tax Benefits on Principal Repaid
Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of a home loan is Rs. 1.5 lakh. Deduction under section 80C also includes investments done in the PPF Account, Equity Oriented Mutual funds, Tax Saving Fixed Deposits, National Savings Certificate, etc. subject to a maximum of Rs. 1.5 lakhs.
Besides this, there are stamp duty and registration charges that one can claim under the aforementioned section. However, the claim can only take place in the year in which the payment was made.
Nevertheless, there’s a condition under which this repayment of the principal amount of the housing loan is allowed. The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same. The principal amount paid on any under-construction structure/property is not going to be a part of this section.
Tax Benefits on Interest Paid
Under section 24 of the Income Tax Act, one can avail of the deduction on a Home Loan for payment of Interest tax benefits. The self-occupied property allows the deduction with a maximum limit of Rs. 2 lakh if it takes completed within 5 years from the end of the Financial Year, otherwise, the maximum limit is Rs. 30,000.
Interest on housing loans paid for the let-out property is fully allowed in the relevant assessment year in which it is claimed.
From Assessment year 2018-19, the loss from house property head that will be allowed to be set off from other heads of income will be restricted to Rs 2,00,000 in a particular assessment year, and the rest amount shall be carried forward for set-off in subsequent years.
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Tax Deduction on Pre-construction Interest
You can also claim interest on a housing loan paid before the completion of the construction of the property. It is termed pre-construction interest. It is allowed in 5 equal instalments beginning from the financial year in which the construction is completed. The limit of 2 lacs will also apply for pre-construction interest in the case of self-occupied property. However, it is fully allowed in case we let our property.
Section 80EE Income Tax Benefit
Section 80EE proposes an additional deduction of Rs 50000 in respect of interest on housing loans to first-time house owners who own a house of Rs 50 lakh or less and have taken a home loan amount of less than or equal to Rs 35 lakh. The loan should be sanctioned between April 1, 2016, and March 31, 2017, to claim a deduction under this section. This deduction shall be in addition to the interest allowed under section 24(b) of the Income Tax Act, 1961.
Deductions Claimed by Individuals Under Section 80EEA
As mentioned under the newly inserted section 80EEA of the Income Tax Act, the government has extended the limit of deduction up to Rs. 1,50,000 applicable to the interest paid by any individual on the loan against residential property.
As per the policies, the deduction is available for individual residents only and for the property having a stamp value of less than Rs. 45 Lakhs.
Also, the loan needs to be sanctioned between 1 April 2019 to 31 March 2022, and the individual should not own any other residential property at the date of sanctioning the loan. Lastly, the person should not be eligible for claiming any deduction U/S 80EE.
Joint Home Loan Deduction
In case the home loan is taken jointly, then the loan borrowers are eligible to claim a deduction of up to 2 lakh each for the home loan interest and principal repayment u/s up to INR 1.5 lakh each in the tax return individually. They all must be co-owners of the property and further it helps in the larger tax claim benefits if in the family itself.
| Deductions | Section | Maximum Deduction (INR) | Conditions |
|---|---|---|---|
| Principal | 80c | 1.5 Lakh | No sale of property within 5 years |
| Interest | 24b | 2 Lakh | The loan has to be taken for construction and has to be completed within 5 years |
| Interest | 80EE | 50,000 Thousand | The loan amount must be under 35 lakhs , and the property value under 50 lakhs |
| Stamp Duty | 80C | 1.5 Lakh | Availed only in the year of expense |
| Interest | 80EEA | 1.5 Lakh | The stamp value of the property is under INR 45 lakh. Taxpayers are not eligible to claim a deduction under section 80EE |
However, in the new tax regime, deduction is not allowed under sections 24(b), 80C, 80EE and 80EEA.
I am retired CG employee and retired on 31 may 2024. Can i show principle of home loan up to 1.500 lakhs under 80C while filing. but problem is while filing 80 c deduction column is not comin i.e showing . how to filke in this case
Hello Sir. My query is for LTCG tax exemption for home. Suppose I’m availing of a loan to buy a new property which will be available for possession within 6 months. When I get possession of property after that I will sell the current home(in which I’m residing). I will use that sale amount to payoff the loan for my new property. Will I be allowed for exemption from LTCG tax for sale of my current home ? As I will be using it to repay home loan only which was used for acquiring a property. Since I will get possession after 6 months only, that is why I have to avail of home loan in order to make payments
“As per section 54 seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer or construct the residential house within 3 years from the date of sale/transfer then seller can avail tax exemptions from Capital Gains.”
Hi,
I was having home loan which I have fully paid in FY 2023-2024. However the home loan interest paid in previous years before closure was always more than the tax benefit amount of Rs 2 lac.
For eg. in FY 2023-2024 the total interest paid was Rs. 5 Lac. where as I have claimed tax benefit of Rs. 2 Lac (max allowed as per IT). Thus the remaining amount of interest paid is Rs. 3 Lac.
Can I now claim the tax benefit of Rs. 2 Lac again from this previous year interest paid remaining amount of Rs. 3 Lac for the next FY Year i.e. 2024 – 2025 or even the remaining amount of interest for previous years like 2022-2023, 2021-2022 et.
If yes, what is the number of previous years from which I can claim this kind of tax benefit and till what time?
Thanks.
Sundeep
The deduction of INR 2 lakh is allowed for self-occupied property, and the entire interest is deductible for let out property & unabsorbed loss shall have to be carried forward for set off against house property income in next eight years in case of let out property.
hi sir
is the interest on the home loan of the let out property can completely claimed under 24 b, .i.e more then 2 lakhs
or only while calculating the income from the home loan
Under section 24b deduction can claim up to 200000. Section 80EE allows income tax benefits on the interest portion of the residential house property loan availed from any financial institution. As per Section 80EE, you can claim a deduction of up to Rs. 50,000 per financial year in addition to 24b.