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 (New section 130) 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 (New Section 22) 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 (New Section 130) 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 (New Section 131)
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 on 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 a home loan is taken jointly, each co-borrower can claim a deduction of up to Rs. 2 lakh for interest on the home loan under Section 24(b) and up to Rs. 1.50 lakh for principal repayment under Section 80C in their respective income tax returns. However, the borrowers must also be co-owners of the property. Joint home loans can therefore help families avail higher overall tax benefits.
| 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 corresponding to sections 22(2), 123, 130, 131 under the new Income Tax Act, 2025.
Sir
I have taken a housing loan, from LIC HFL to construct the first floor.(Self-occupied)
The loan sanctioned under the category ‘ Extention of House /Flat’. I have paid 82000/- towards interest and 58000/-towards principal.
In this case, how much tax rebate will I get?
Is it a full amount of loan or 30000/-?
You can claim interest under section 24 and principal repayment under section 80C
Hello.
I have taken a loan on 52 lakhs and I bought the property for 70 Lakhs,
Here, tax is deducted from my salary every month, When I applied for the tax deduction, The Accountant has mentioned the stamp duty value is more than 45 lacks. And I have paid only 3,80,000 as stamp duty.
Kindly guide with your expert input so that I could share your input to my HR and accountant,
Hi
Stamp duty value of property means the value on which stamp duty is required to be paid. In your case, if you have paid 3.80 lakhs as stamp duty on 45 lakhs value, then Stamp duty value is 45 lakhs and stamp duty paid is 3.80 lakhs. For submitting the information to HR, you need to mention the principal amount of loan paid during the year and stamp duty paid during the year both of which are eligible for deduction under section 80C up to 1.5 lakhs. Also, interest paid on house loan during the year is eligible for tax benefit under section 24(b) up to 2 lakhs.
I have taken 28 Lacs loan from SBI in the current financial year. Is there any benefit declared by the govt in the bracket of 6-18 lacs /yearly income bracket?
Sir,
I request to inform you that Interest on Housing Loan INR 2,00,000/- u/s section 24 and Principle INR 96,779/- where to shown In form 24-Q for F.Y.2019-20 – 4th quarter as the section 24 column is not provided in Form 24-Q. Regards
Sir, I have taken a home loan on March 2020, total interest 325000, and principle 110000 can I claim the interest part both 80eea and section 24b. please clarify.
Deduction for interest payments up to Rs 1,50,000 is available under Section 80EEA. This deduction is over and above the deduction of Rs 2 lakh for interest payments available under Section 24 of the Income Tax Act. So you can claim interest under both sections
I have taken a loan from a friend for the construction of a house. House construction completed. I am paying interest to a friend. Can I claim interest u/s.24? It is informed that loans must be taken from financial institution ie banks etc now mandatory. from which assessment year it has taken place.
Thank you and regards
Srinivas
You can claim interest u/s 24 if loan taken from bank and financial institution.