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 (New section 130) 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 (New Section 22) 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 (New Section 130) 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 (New Section 131)
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 on 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 a home loan is taken jointly, each co-borrower can claim a deduction of up to Rs. 2 lakh for interest on the home loan under Section 24(b) and up to Rs. 1.50 lakh for principal repayment under Section 80C in their respective income tax returns. However, the borrowers must also be co-owners of the property. Joint home loans can therefore help families avail higher overall tax benefits.
| 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 corresponding to sections 22(2), 123, 130, 131 under the new Income Tax Act, 2025.
Dear Sir,
I owned a flat earlier and sold the same in May’2017. Now, I have bought a land on 15th July-2017 and the construction is going on. It will be completed within June’2018.
What I want to know is whether I can claim the interest of Rs.200000/- under sec.24, and also the first-time buyer since I don’t have any house u/s/80EE, the property sanction loan is 34.5 lacs and the value of the property is less than 50 lacs.
You can claim the deduction of interest amount only when the construction is completed. Interest for the period prior to the date of construction is allowed in five equal instalments from the year in which construction is completed.
Sir, I have purchased a plot on Apr 17 and the construction is going on, which will be completed in Jun18.Loan sanctioned is Rs.34.75 Lacs.on 25.05.17.
1. I had one property before and sold the same on 05.05.17, well before the sanction of this loan, by fulfilling conditions like not owning a house at the time of buying new property and also less than 34.75 lacs. Will I able to get a deduction of Rs.50000/- under section 80EE this fy 2017-18: ay:2018-19.
2. As said earlier, l will get possession of this property by June’18 only. But, I have started paying EMI from jul17 onwards, which works out to Rs.1,82,975/-. Can I start my 1/5th of construction interest, i.e.,Rs.,36,000/- from this AY 2018-19:FY:2017-18.u/s24.
Request your help in reply, please.
1) The loan taken between 01/04/2016 to 31/03/2017 are only eligible for 80EE.
2) As possession will be transferred in F.Y. 2017-18, so deduction u/s 24b will only be eligible from F.Y. 2017-18.
I have taken a personal loan and construct my home can I still claim the deduction as the loan was not house loan because I cant get it because of locality problem.
i have taken personal loan and used such amount for my home can i claim deduction under 80ee
The deduction is not allowed for personal loan taken for construction of residential house property.
I have taken a home loan but I registered the property for my mother’s name only, can I avail tax rebate?
Thanks in advance
As the property is not registered in your name, you cannot avail tax rebate, as the income from such property will be taxed in the hands of your mother.
I purchased resale flat under construction in May 2017. Home loan EMI (Principal + Interest) started from July 2017 as expected possession was in September 2017. Now possession is delayed to July 2018. So I am not able to claim tax benefits for Principal Rs 1.5 lac and Rs. 2 lac this year 2017-18. When I can claim these tax benefits? Do I need to let go 80C benefit this year so that I can claim tax benefits in future against principal paid this year?
You can claim the deduction of the interest and principal in the F.Y. 2018-19 only. Deduction for the interest pertaining to the period prior to date of possession can be claimed as a deduction in five equal installments beginning from the year in which construction is completed or possession is acquired.