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.
The bank approved my loan starting 26-02-2015 and the final disbursement was in 20-04-2016. Between the start date and final disbursement, there were 6 step payments by the lender to the builder. Would I be eligible for Section 80EE claim this year?
I was not aware of this for the last to IT returns and have not claimed the same towards that. Please advise. Thanks!!
The deduction under 80EE shall be subject to the following conditions, namely:—
(i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April 2016 and ending on the 31st day of March 2017;
(ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees;
(iii) the value of residential house property does not exceed fifty lakh rupees;
(iv) the assessee does not own any residential house property on the date of sanction of loan.
since your loan has been sanctioned before 01.04.2016, therefore, you cannot claim deduction under section 80EE for the A.Y. 2019-20.
Hi,
I am scheduled to get possession for my second house before 31st March 2019. Due to higher property value & as loan sanctioned in 2015, I may not be eligible for tax benefits under section 80 EE. However, can I claim entire interest amount paid in FY 2018-19 for tax benefits if I complete possession formalities before 31st March?
If I let out the second property, then what is the upper cap for the amount of interest paid for the second housing loan that can be claimed for tax exemption?
Yes, you can claim an interest deduction for fy 18-19 if possession is taken in March. No upper cap for the amount of interest paid. set off of losses is allowed up to Rs. 2 lakhs from other of income.
I have purchased home in 2017. I claimed 80ee benefit in ay 2018-2019. My question is can I take benefit of 80ee this year also ay 2019 2020.
Yes, you can claim a deduction for payment of interest on house loan is taken in 2016-17.
Yes, you can claim the deduction in AY 19-20 also.
Hi,
I am about to get the possession of my second house before 31st March 2019. Due to loan sanction date & loan amount, I am not eligible for tax benefit under section 80EE. However, can I claim tax benefits on the entire interest paid in current FY? If I let out this property, would there be any upper limit on the interest amount that can be claimed for tax benefits?
Hi,
I have purchased Empty plot ( 1200 Sq ft) with an SBI Home loan of 5.5 Lakhs in Nov 2018. Paying EMI of 11K. This is for the first time I am taking a home loan & I do not have any other property under my name.
Will I be eligible for any tax benefit? Sec 24 (b), 80 EE or under any other section?
Thanks
Srirama
80ee is not available since the loan has not been sanctioned by the financial institution during the period beginning on the 1st day of April 2016 and ending on the 31st day of March 2017. but you can claim deduction under section 24(b).
Sir, I have two house loan. Can I claim two house loan interest in section 24 in limit 2.00 lacs for f.y.2018-19?
Yes, you can claim.