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.
Dear sir, I took the sanction letter of home loan of 18 lacs in 2012-2013 under CLP plan. Bank paid the amount to the builder as per demand by the builder in installments as per construction. I paid only interest of this amount up to December 2014. From December 2014 I am paying principal and interest both. I received the possession letter in November 2018. Kindly guide me if I am eligible for 2 lacs rebate on interest.
Under section 24 of the Income Tax Act, Rs 200000 will be allowed as a deduction from House Property Income if the construction is completed within 5 years from the end of FY in which loan is taken otherwise Rs 30000 will be allowed as a deduction
how much home loan interest amount will be considered for loan taken more than 45 lakhs, is it 2 lakhs or 3.5 lakhs. please clarify. Thank you.
The interest on the home loan paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh under Section 24. The Principal portion of the home loan paid for the year is allowed as a deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. But to claim this deduction, the house property should not be sold within 5 years of possession. You can claim additional deduction u/s 80EEA for maximum up to Rs 1,50,000. To claim this deduction, the stamp value of the property does not exceed Rs 45 lakhs and loan must have been sanctioned between 1 April 2019 to 31 March 2020.
My yearly interest component is 4 lacs for a loan taken on Apr 2018. The property is self-occupied. Since I can only claim 2 lacs ceiling on interest, is there any provision for claiming the additional 2 lacs loss? If I let out this property, can the full interest component be claimed?
Hi,
My brother and I share the medical insurance premium of our parents. The proposer of the insurance is my brother. I pay him half of the amount. Can I claim half of the amount of the premium under section 80D?
Thanks
Manav
You are not eligible to claim deduction u/s 80D as the proposer of the insurance is your brother.
Why are there no extended benefits like 80 EE or 80 EEA for houses booked in FY 2018-19
Date of Loan sanction is 26/04/18 and flat was occupied on 1/09/2018. Both the schemes 80EE and 80 EEA are not covered for this date particularly. Any reason why only this year is not under special benefits?
In FY 2018-19 section 80 EE benefit is not available.
Dear Sir/Madam,
I have taken a joint loan which was sanctioned on 23-01-18 which comes under FY 2017-18. The loan amount is 10 Lakh and the property value is 45 Lakh. Am I eligible for either 80 EE or 80 EEA? For how much deductions am I eligible?
not eligible for FY 2017-18 or even 2018-19, it is w.e.f FY 2019-2020