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 a housing loan with a joint name me and my father but the house is own by my father only but 100% EMI is debited from my account as my father has no source of income. Do I get tax benefits?
If the loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest and principal repayment if they are co-owners of the property.
Hi Madhav
For claiming tax benefits under income tax act, you need to be borrower and owner both. In your case, i suggest that you should revise the terms of sale deed and become co-owner to the property.
Dear All
Let me know first time home buyer 2019, how much amount exemption will get (Interest Part) under 80EE, What are the supporting documents required to submit while income tax filing.
You can claim deduction u/s 80EE up to Rs 50000 if the loan has been sanctioned between 01.04.2016 to 31.03.2017. For further details kindly refer to section 80EE.
You can claim deduction u/s 80EE up to Rs 50000 if the loan has been sanctioned between 01.04.2016 to 31.03.2017. For further details kindly refer to section 80EE.
Dear Pradeep,
My home possession: June 2016. So, I took rebate on the (Total pre-construction interest amount / 5) for 3 years (in FY 16-17, 17-18, 18-19).
As per the rule, I am eligible to take rebate on the remaining two installments in FY 19-20 (current FY) & FY 20-21.
But my employer saying that these remaining two installments of pre-construction interest amount is not eligible for the rebate, as I have closed(fully paid) my Loan account in FY 18 -19 (last FY).
Could you please confirm this and guide?
Thanks!
In case of loan taken for purchase or construction of a house property, you can claim a deduction on pre-construction interest. The deduction for interest paid before construction or completion is allowed in 5 equal installments from the year in which the house is purchased or the construction is completed.
Sir, I have taken a joint home loan in February 2019. Can I get the benefit of Section 80EE or 80EEA?
There is nothing specific mention about the interest on home loan taken jointly under section 80EE or 80EEA.
I have taken house loan during February 2019 can I get exemption on principal amount and interest paid this is my first-time house purchase
Also, I have paid stamp duty and registration fees for the mortgage and transfer the property on my name total RS. 192000/- stamp duty and registration fees for transfer property on my name.
And availed housing loan stamp duty and registration fees paid 30500/-
Can I claim for 2019-20 AY r2020-21??? please guide
Interest on house loan – If the loan is acquired after 1st April 1999 and construction of the house is completed within 5 years from the end of the financial year in which loan is taken then the amount of deduction for Interest on house loan u/s 24(b) will be maximum Rs 2 lakh otherwise deduction shall not exceed Rs 30000.
Principal Amount:- Deduction u/s 80C will be available for the principal repayment of house loan.
Sir,
I have availed housing loan in July 2018. I and my wife are its joint borrowers. kindly let me know if we can claim deductions under section 80EE or 80EEA. confused to see that deductions under 80EE of Rs 50000 are allowed for loan sanctioned between April 2016 to March 2017 and that of Rs. 150000 are allowed for loan sanctioned between April 2019 to March 2020. What about the in-between period of sanctioning i.e April 2017 to March 2019.
There is nothing specific mention about the interest on home loan taken jointly under section 80EE or 80EEA. Deduction u/s 80EE, 80EEA is not available for the period from April 2017 to March 2019