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.
Submit Query for Tax Return Filing Software
Read Also: Tips to Save Income Tax in India
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.
Where to show in ITR 1 section 80ee amount, because there Is no section 80ee in ITR 1 while e filing. Please advise which head to be use to input 50,000?
Please check department’s utility for ITR-1. 80EE section is provided in deductions.
Hello,
Home Loan Principal Part of 1,50,000 to be claimed under 80C – Under which heading does this needs to be claimed? As in the new ITR 1 the House Loan Principal is not listed at all. Please assist.
Thanks
In ITR-1 utility, there is a single common row to enter 80C deductions. You need to enter consolidated deductions in that row only.
We are constructing one floor more & took loan around 14 lac. Bank gave us 2 lac in March 2018 & instalment starts from April 2018, myself and brother open joint account for that, because property belongs both of us.
What should I do now, while filling tax return?
You can claim the deduction for interest paid u/s 24(b) for improvement in house property.
My question is, Amount cr in my account by the bank in March 2018 & Interest paid by me to the bank in April 2018.
so I have to mention this 24(b) in this 2017-18 or 2018-19 financial year?
If the period of which interest is paid in April, falls under FY 2017-18 then you need to show under 2017-18.
both brother claim half half interest in itr 1 under section 80c
My loan for 30 Lakh was sanctioned in FY 2015-16. However, disbursement was in instalments with 28 Lakh disbursement after April 2016. Cost of the house is 36 Lakh. This is my first house. Possession and Registration were done in November 2017. Keeping in mind the disbursement schedule, will 80EE be applicable for amount released after April 2016 though sanctioned prior.
Under section 80EE, it is specifically mentioned that the sanction date should fall in FY 2016-17. Since this condition is not fulfilled in your case, you cannot claim deduction under this section.
I have taken a Home loan 20L for purchasing a Flat in Feb 2017. Can I avail the deductions?