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Tax Benefit on Home Loan Interest & Principle F.Y. 2024-25

Tax Benefit on Housing Loan

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.

    DeductionsSectionMaximum Deduction (INR)Conditions
    Principal80c1.5 LakhNo sale of property within 5 years
    Interest24b2 LakhThe loan has to be taken for construction and has to be completed within 5 years
    Interest80EE50,000 ThousandThe loan amount must be under 35 lakhs , and the property value under 50 lakhs
    Stamp Duty80C1.5 LakhAvailed only in the year of expense
    Interest80EEA1.5 LakhThe 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.

    Disclaimer:- "All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error. The blog we write is to provide updated information. You can raise any query on matters related to blog content. Also, note that we don’t provide any type of consultancy so we are sorry for being unable to reply to consultancy queries. Also, we do mention that our replies are solely on a practical basis and we advise you to cross verify with professional authorities for a fact check."

    Published by CA Suchi Sharma (Ex-employee)
    I'm Suchi Sharma, a finance expert who is committed to doing things the right way. As a chartered accountant, I have the skills and knowledge to help you navigate the complex world of finance. Whether you need help with taxes and accounting, I'm here to provide you with the best possible advice and guidance. View more posts
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    513 thoughts on "Tax Benefit on Home Loan Interest & Principle F.Y. 2024-25"

    1. Hi,

      For the FY: 2017-18 my home loan’s remaining interest calculation (after all deductions) is coming out to be < 2lacs.

      How can I carry forward the remaining interest from previous years? Should I just increase the Interest component coz currently I have just mentioned FY: 17-18 interest only for the calculation.

      Please let me know.

        1. Hi,

          Thanks for your inputs. Are these schedule part of ITR1? I am not seeing anything over there. Also last year I didn’t mention anything like that so how can I use BFLA?

          Regards
          Anurag

    2. Dear friend, for FY17-18

      My home loan interest is 3Lakh50thousand, 2 L is deducted from Annual salary. Met 80C with other investments.
      How can I claim the excess tax paid: 1.5 L
      Have Let out property for rent with income of of 72K. Please guide

      1. Your rental income net of 30% standard deduction comes to 50400/-. Firstly you will get set-off of home loan interest from this net income.
        Remain interested comes to Rs. 296000/- (350000-50400) Then, Rs. 200000/- will be set off from salary income. Remaining interest will be carried forward to the next assessment year.

        Please note that if the home loan interest is for self-occupied property, then only Rs. 200000/- deduction will be available. In this case Rs. 149600/- will be set off from salary income and no amount will be carried forward.

    3. Hi,
      I have taken a home loan for an under construction property valued at less than 50lac in May 2016. and paying the PEMI Interest. Can I claim under 80EE

      PLEASE ADVISE

    4. I buy a new resident flat in May 2016 by a Home loan of 13.50 Lacs which was approved by the bank in July 2016. The above said flat is under construction. Till the date, It ‘s not complete and not handover by the builder. I pay EMI to the bank for above property from Aug-Sept 2016.
      Tax certificate issued by them says “This Certificate is issued in order to enable you to claim the deduction from Taxable Income under SECTION 24(b) of the INCOME-TAX ACT, 1961.” The break-up of the amount into Principal and Interest is PRINCIPAL COMPONENT Rs. 13,020.00 and INTEREST COMPONENT Rs. 77,319.00 and PRE-EMI INTEREST Rs. 2,673.00.

      My question is:-

      a. May I get the tax deduction from the home loan? Which amount is taxable i.e. principle or interest? How to claim it?
      b. May I get any tax deduction or benefit from 80EE and Sec-24? If Yes, how I claim it?
      c. Which ITR form is suitable for this?

    5. I bought a plot in Hyderabad, HMDA Approved and I was given HOUSING LOAN from INDIA BULLS for Rs 8,19,060/-

      Tax certificate issued by them says I can avail tax benefit u/s 24(b) & 80c(2)(xviii). Price Component 40,423/- and Int comp 71,275/-

      I neither built any house nor started building a home. I paid tax from salary without considering

      Am I eligible for Tax benefit or not? If yes guide me in e-filing income tax.

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