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 SAG Team
I have taken a home loan of 48 Lac in the month of Mar 2020. Where EMI is Rs 48500.
How much Interest and the Principal amount is eligible for this FY 2020-21 and previous year also. Since am got the sanction of Home loan on 19.03.2020.
Please clarify
Please refer section 24(b), 80c, 80ee and 80eea of income tax act 1961
Sir, can we claim interest paid on house property in the year in which house property is sold
FOR CLAIMING INTEREST ASSESSEE SHOULD BE THE OWNER OF PROPERTY
Is there any benefit for the loan taken on commercial property purchased. what kind of loan would be helpful, if a personal loan is taken and invested in commercial property, what are the tax benefits.
Hello SAG Infotech.
If the property is purchased in joint name, does it mean that the stamp value of the property and home loan availed can also be shared on both the name? For example, if property stamp value is 65 lac and loan taken is 74 lac, is it correct that property value can be considered as 32.5 lac and loan can be considered as 37 lac for each owner.
If the property purchased in the joint name then stamp duty value of a property will be bifurcated in the proportion of their ownership share and house loan also taken in a joint name then loan taken is also bifurcated in the ownership share.
I had got the 29lac loan sanctioned in June 2018 from financial coy and got the balance loan of around 23lac was transferred to a bank in July 2019. will I be eligible for interest deduction under Sec 80EEA?
My son and wife jointly purchased an apartment (co-owners) in Aug 2019, for which they have paid 11.0 Lakhs as stamp duty. The payment towards the loan was 75000 for the principal component and 7.5 Lakhs towards the interest. The property is let out.
1) Can each of them claim 1.50 Lakh deduction under section 80C?
2) Considering 50% ownership and equally dividing the income and interest liability, Loss from House property works out to about 2.9 Lakhs per head. Can both of them claim the balance (90,000) as carrying forward losses in schedule CFL?
Thanks in advance for the clarification
1) Yes, 1.5 lakh deduction under section 80c can be claimed by both of them
2) No, Loss from house property can be claimed by both of them in their proportionate shares i.e. 1.45 lakh by son and 1.45 lakh by your wife.
How much to claim a deduction for interest on H/L, apart from 80C 150000. A bank loan is taken for self-occupation in 2013.