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 have purchased a Property worth 62 lakhs, jointly with my wife.
The Loan Amount is 46 lakh and we equally give the EMI to bank.
The property is on fully let out on rent and i have shown the income from house property subtracting the Interest paid under sec 24 and rent coming from property.
I am using the 80C section for Repayment of Housing Loan and using it upto 1.5 lakhs.
Since this is me and my wife’s first property, so can we avail House Loan Interest Deduction U/S 80EE?
For claiming deduction u/s 80EE, property value must be below than Rs. 50lacs. So, as your property value exceeds the threshold limit, you are not eligible to claim interest deduction u/s 80EE.
I have taken the home loan in the year 2013 from Corporation Bank for Amount of Rs 29 Laks. Later I have switched to SBI in Dec 2016. Am I eligible for benefit of Rs 50,000/- under 80 EE.
The term used in section 80EE is “loan sanctioned”. Since the loan is sanctioned in 2013, no deduction will be available.
Hi, my question is what if someone has taken Mortgage loan for house development but the bank certificate clearly mentioned Mortgage loan,
Can he claim interest exemption same as housing loan interest?
You can claim deduction of principal repayment under 80C and interest u/s 24 (up to 30000/- if loan is for repair, renewal or reconstruction of house)
Hi
I just purchased the flat amount of Rs 38,00,000/-
The building is in under construction. That will be completed on Year – 2022
I had taken Rs. 31,00,000/- home loan. I m working in one software company. My CTC is around Rs. 8,00,000/-
My monthly EMI is Rs. 27,800/-. So I m paying yearly (27800 *12)= Rs. 3,33,000/-
Please let me know what kind of the tax benefit, I will get of home loan principal & home loan interest under form 16.
Thank you very much in Advance
As the house is still under construction, so deduction u/s 24(b) off interest paid on the home loan will be allowed from the year in which construction got completed.
I had purchased my first flat for 37 lac through the home loan of 26 lac sanctioned in Aug-16. I got possession of flat in Sep-17. My pre-EMI interest is around 1 lac. My loan interest for FY:2018-19 is around 2.2 lac as per provisional loan statement was given by my bank. 1/5th of pre-EMI is coming to be 20k. Now can I claim my pre-EMI interest in section 80EE? How much can I claim under section 80EE considering both normal interest and pre EMI interest for FY: 2018-19.
You can claim deduction u/s 80EE Up to Rs.50,000 for the A.Y. 2019-20.
I am a senior citizen and own a house property. I plan to build/construct an additional floor on the same house property for which planning to avail home loan.
“Question: under which sections can I claim tax benefit and for how much amount if
a) the newly constructed floor is Self-occupied by me”
b) the newly constructed floor is Let out on rent by me. I still stay in the same house in the other floors.
Details of Loan:
Loan Amount : 10,00,000 Lac (INR)
Monthly EMI – 20,613 per month (INR)
Interest rate: 8.70%
The total interest which I will be paying in a period of 5 years
Duration of Loan: 5 years from 1 April 2018 to 31 March 2023
Expenses incurred before availing the home loan in 2017:
Paid charges to MCD for approval of construction and floor plan: 1,00,000 (INR) in the year 2017 (Loan was taken from relatives for this amount. Interest paid to relatives @7% p.a for 2 years)
Home Loan has taken in the year 2018:
“Expenses incurred at the time of taking home Loan:
Property clearance report charges: 6,000 (INR)
Property Valuation charges: 7,000 (INR)”
Construction of Property started in the year 2018 after taking Loan and finished in 2018 itself
Please refer to section 24(b) and 80EE of Income Tax act.
I purchased a house availing Home Loan which is fully adjusted. Now I want to avail Home Loan for extension of construction. Can I avail exemption U/s 80 C for repayment of principal?
An 80-C deduction can be claimed on principal repaid for purchase or construction of residential property. You have already claimed the deduction for the purchase of a house. Now if you are constructing a new floor altogether then the deduction will be allowed.