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.
Respected sir,
Will I be eligible for deduction under this section if my house loan is sanctioned after 01 Apr 2017.
Thanks and regards
Kamlesh Pant
As the prerequisite for claiming deduction u/s 80EE, is that loan should be sanctioned between 01/04/2016 to 31/03/2017, so you will not be eligible to claim deduction u/s 80EE
I HAVE PAID MY TOTAL LOAN OUTSTANDING IN NOVEMBER AND I HAVE NO DEDUCTION U/S 80 C EXCEPT HOUSING LOAN PRINCIPAL. KINDLY TELL ME THE CLAIM AMOUNT IN 80C
Only principal amount paid during the period is eligible for 80C deduction.
Dear Sir,
I am paying H/Loan Interest of 350000/annum and have paid TDS amount of Rs 62000/- in this Fy. As per section 24 how much deduction can I claim and further can I also claim the deduction of TDS amount of 62000/-
My husband’s father taken a home loan and was paying EMI but now after retirement, my husband is paying the EMI. The loan is taken on my husband’s fathers name for the renovation of the house. Now whether my husband takes tax saving benefit of EMI paid and if not then whether is it possible to change the name of loan owner in the bank from my husband’s father name to my husband name?
For claiming tax benefits, both the house and loan should be in the name of the person (owned or co-owned) claiming such benefit.
Hello,
I’ve a query on income tax exemption on multiple home loans.
For my first home loan, I’m paying interest of 1.4 Lakhs and principal repayment of 1.38 Lakhs.
For my second home loan, I’m paying interest of 4.35 Lakhs and principal repayment of 1.42 Lakhs.
My query is specifically for the second loan. If I declare second home as deemed let-out then can I claim an exemption for full 4.35 Lakhs (excluding nominal rent)?
Or is it that maximum benefit that I can avail together for both house is 2 Lakhs?
If its the former one, then can you point me to an income tax section or an official link that I can present to people evaluating IT liability in my office, as they reckon its the later one and the benefit that I would get on interest payment cannot exceed 2Lakhs.
Thanks.
As the second house is treated as deemed let -out and as per recent amendments in section 71, losses under house property can only be set off up to Rs. 2 lacs, the remaining amount of interest can carry forward for next years for set off.
Hi,
I have taken loan amount of 28 Lac on July 2017 and property value is 36 lac. Am I eligible for 80EE?
As your loan has been sanctioned after march, 2017, you are not eligible for claiming deduction u/s 80EE.
Me and my father have taken a home loan of 10 Lakh jointly. My father is co-borrower. The loan is for the renovation of the house. The house is on my father’s name. And I am living in a different city, my father stays in that house and that is in construction. Probably will be completed in a month or so. I am paying 9k as EMI of the loan.
Can I get the tax benefit for interest as well as the principal amount on the loan i.e section 24(b) and 80C?
Thanks in advance.
In order to claim tax benefits u/s 24, the main condition is that the property should be owned or co-owned. Since the property in your case is on father’s name, you cannot claim these deductions.
Deduction u/s 80C is available only where the loan is taken for acquisition or construction of residential house.
Hi,
Is there a restriction on where the property should be present like within the city municipal or town municipal/metro city etc?
Can i claim tax benefit under section 80EE of income tax for interest paid for home loan of an under construction property if I am otherwise eligible.
As per the wordings of section 80EE, the loan should be taken for “acquisition” of residential property. Thus you cannot claim deduction w.r.t. under the constructed property.
Hi.
My total Home loan Interest was 3 lakh in FY 2017-18, and out of which only 2 lakh was allowed as for tax deduction.
Now as per rules, this balance interest component can be carried forward in the next 8 yrs, but anyone explains me the process for that.
Suppose 3 years later my interest outgo is 1.5 lakh then can I take the carry forward benefit in one go Or there is some restrictions or rules (like for pre-construction period interest is carry-forwarded in 5 equal installments)
Please clarify your query. You can refer to the examples available for section 24b read with section 71(3A)
I have purchased a Property worth 62 lakhs, jointly with my wife.
The Loan Amount is 46 lakh and we equally give the EMI to bank.
The property is on fully let out on rent and i have shown the income from house property subtracting the Interest paid under sec 24 and rent coming from property.
I am using the 80C section for Repayment of Housing Loan and using it upto 1.5 lakhs.
Since this is me and my wife’s first property, so can we avail House Loan Interest Deduction U/S 80EE?
For claiming deduction u/s 80EE, property value must be below than Rs. 50lacs. So, as your property value exceeds the threshold limit, you are not eligible to claim interest deduction u/s 80EE.
I have taken the home loan in the year 2013 from Corporation Bank for Amount of Rs 29 Laks. Later I have switched to SBI in Dec 2016. Am I eligible for benefit of Rs 50,000/- under 80 EE.
The term used in section 80EE is “loan sanctioned”. Since the loan is sanctioned in 2013, no deduction will be available.
Hi, my question is what if someone has taken Mortgage loan for house development but the bank certificate clearly mentioned Mortgage loan,
Can he claim interest exemption same as housing loan interest?
You can claim deduction of principal repayment under 80C and interest u/s 24 (up to 30000/- if loan is for repair, renewal or reconstruction of house)
Hi
I just purchased the flat amount of Rs 38,00,000/-
The building is in under construction. That will be completed on Year – 2022
I had taken Rs. 31,00,000/- home loan. I m working in one software company. My CTC is around Rs. 8,00,000/-
My monthly EMI is Rs. 27,800/-. So I m paying yearly (27800 *12)= Rs. 3,33,000/-
Please let me know what kind of the tax benefit, I will get of home loan principal & home loan interest under form 16.
Thank you very much in Advance
As the house is still under construction, so deduction u/s 24(b) off interest paid on the home loan will be allowed from the year in which construction got completed.
I had purchased my first flat for 37 lac through the home loan of 26 lac sanctioned in Aug-16. I got possession of flat in Sep-17. My pre-EMI interest is around 1 lac. My loan interest for FY:2018-19 is around 2.2 lac as per provisional loan statement was given by my bank. 1/5th of pre-EMI is coming to be 20k. Now can I claim my pre-EMI interest in section 80EE? How much can I claim under section 80EE considering both normal interest and pre EMI interest for FY: 2018-19.
You can claim deduction u/s 80EE Up to Rs.50,000 for the A.Y. 2019-20.
I am a senior citizen and own a house property. I plan to build/construct an additional floor on the same house property for which planning to avail home loan.
“Question: under which sections can I claim tax benefit and for how much amount if
a) the newly constructed floor is Self-occupied by me”
b) the newly constructed floor is Let out on rent by me. I still stay in the same house in the other floors.
Details of Loan:
Loan Amount : 10,00,000 Lac (INR)
Monthly EMI – 20,613 per month (INR)
Interest rate: 8.70%
The total interest which I will be paying in a period of 5 years
Duration of Loan: 5 years from 1 April 2018 to 31 March 2023
Expenses incurred before availing the home loan in 2017:
Paid charges to MCD for approval of construction and floor plan: 1,00,000 (INR) in the year 2017 (Loan was taken from relatives for this amount. Interest paid to relatives @7% p.a for 2 years)
Home Loan has taken in the year 2018:
“Expenses incurred at the time of taking home Loan:
Property clearance report charges: 6,000 (INR)
Property Valuation charges: 7,000 (INR)”
Construction of Property started in the year 2018 after taking Loan and finished in 2018 itself
Please refer to section 24(b) and 80EE of Income Tax act.
I purchased a house availing Home Loan which is fully adjusted. Now I want to avail Home Loan for extension of construction. Can I avail exemption U/s 80 C for repayment of principal?
An 80-C deduction can be claimed on principal repaid for purchase or construction of residential property. You have already claimed the deduction for the purchase of a house. Now if you are constructing a new floor altogether then the deduction will be allowed.
I have got a home loan starting August 2016 for 35 lakhs. However, construction of my flat got completed in January 2018 and I took the possession in July 2018. We are currently looking for the tenant to rent out this flat. As the construction got completed in 2017-18, I am now looking to get tax benefits on interest paid on both pre-construction and post-construction. As I have EMIs of around 30,000/-, I have already reached the 2,00,000/- limit just by post-construction. How can I get benefit from pre-construction period?
As you have constructed your house so you will not be eligible for the excess deduction of Rs. 50000 u/s 80EE, hence you will only be allowed interest deduction up to Rs. 200000, and remaining will be carry forwarded to next years.
Thanks for the prompt response! Though I am still in doubt.
Let’s say I had constant EMI of 30,000/- per month (25,000/- as the interest component). It started in August 2016.
Interest paid in F.Y. 2016-17 = 25000*8 = 2 lakhs
Interest paid in F.Y. 2017-18 = 25000*12 = 3 lakhs
As of now, I have not taken any tax benefit so far. While filing ITR of 17-18, I am showing my running home loan (as construction got completed in 17-18). Hence, I am filing 3 lakhs as home loan interest + 40,000/- (pre-construction).
However, the maximum limit is 2 lakhs for this entire amount of 3.4 lakhs.
So, I want to understand how can I take the tax benefit for the interest paid till March 2017.
I and my wife together purchased a flat and we both are the co-borrowers of the house loan. Now the entire EMI gets deducted from my account and my salary. Actually, I am first time declaring my investment proofs in my Office portal to avoid TDS Deduction. I got the loan of 25 lakhs so how I can declare this amount in the following section
528
Principal Loan (Housing Loan) Repayment
As per Sec 80C–
Deduction u/s 80C (Principal repayment of the loan) can be claimed by you and your wife in proportion to the share in the borrowing. Each co-borrower can claim up to Rs. 1.5 lacs deduction.
Hello,
Do we get tax exemption on the amount we pay as Property Tax every year, to the municipality? If yes, how is the calculation done and under which section of IT it falls? Please provide your valuable info.
The municipal taxes borne and actually paid during the financial year are allowed as the deduction from “annual rental value” of the house property.
yes we get the deduction of municipal tax paid on cash basis (not accrual) , i.e., amount you paid in this year as property tax , you will be eligible to claim a deduction of that amount .
calculation : house property rax is deductable from GAV (Gross annual value)computed as per section 23
gav = step 1 : municipal rent and fair rent wichever is higher is selected
step 2 : compare the rent so selected with standard rent ( as per rent control act ) andselectthe lower of two
step 3 : compare the rent selected in step 2 with the actual rent and select the higher of both
resulting value is your GAV
Now you can deduct the municipal tax from GAV
reffer section 23 for more detailes .
Hi,
I have taken a home loan sanction in December 2015 but took the disbursement in July 2016. Am I eligible for Tax Deduction of Rs 200000 after completion of my property?
Yes, you can claim the deduction of home loan interest u/s 24(b).
Hi,
I am a first time home buyer and got a loan of 45 lakh. In this newly constructed home my parents are staying and I am staying in a different city in a rented house.
Can I claim HRA, the principle under 80C and interest under 24b all at once? and in which category will it fall? Self-occupied or let out?
Yes, you can claim HRA, 80C deduction and 24b. it can be claimed as a self-occupied house.
I and my husband together purchased a flat and we both are the co-borrowers of the house loan. Now the entire EMI gets deducted from my account and my salary. And my husband saves his money and when it is 1 or 2 lakhs transfer that amounts directly to Loan account which reduces the principal amount. Is he also eligible to claim IT benefits on this loan?
Yes, the deduction will be allowed to both of you.
I got my loan sanctioned in the year 2012 for Rs 23,000,00/ for house property. I got possession of this flat in Nov 2017. This is my only house property. I have got the deduction in my Form 16 for Rs 1,83,000/ for the interest paid on this loan for FY 2017-18.
How much Extra deduction for interest paid in last 5 years can be claimed by me in my ITR-1.
Pre-construction period interest can be allowed from the year of completion of property in 5 equal annual instalments.
SIR,
My home loan sanctioned on 15 June 2015 and never claimed 80EE in any assessment year, am I eligible to file 50,000 relaxations in 80EE this assessment year
Regards
Honey
To claim deduction u/s 80EE, the condition is that the loan must be sanctioned in FY 2016-17. Thus you cannot claim deduction u/s 80EE.
Sir, I have purchased a flat at 34.00 lakh on 15.11.2016, however, I have taken a composite loan of 38.00 lakh which includes 32.00lakh purchase loan and 6 lakh repair and renovation loan. Will I be eligible to claim benefits under 80EE??
I have two home loans running. One is self-occupied and other is let out property. How much tax exemption I should get now. 4 Lakhs (2 Lakhs for each loan) or only 2 Lakhs limit together?
Loss on house property can be set off up to the maximum of Rs. 2,00,000 for AY 2018-19 from other head income.
I have taken the loan for one house before 11 years. till last year I was claiming a deduction of principal & Interest. Now this year I have purchased the new house. I think now can claim principal of only one house and interest of both the house. so, can I claim the principal of second house and interest of second house in self-occupied property and interest of first house under deemed let out property?
You can show any one of the property as self-occupied and treat the interest component accordingly. Principal repayment can be claimed for all the houses up to a maximum of Rs. 150000/-.
I have bought a Flat for investment purpose in 2011 and took a loan for it through LICHFL in the same year as it was Construction linked plan. I got the possession of the flat in 2017 after many delays. I have been paying an Interest of appx 150,000 per year as per the interest certificate provided by the Housing Finance Company. This is my second home as I stay in the other one.
Can I claim the interest benefit for this property? If yes would it be only for interest paid in the current year only or I could take benefit of interest of last 3/5 years
Yes, you can take the benefit of interest paid during the FY in its respective ITR. This property would be treated as “deemed let out”. The pre-acquisition interest can be claimed in 5 equal instalments in 5 years beginning from the year in which the property was acquired.
I HAVE PAID RS 70000 AS INTEREST ON HOUSING LOAN IN FY 17-18. CAN I SHOW IT AT INTEREST PAYABLE ON BORROWED CAPITAL? IF NO THEN WHERE CAN I SHOW IT? PLEASE GUIDE.
Yes, you can claim the deduction of Rs. 70000/- under “Income from House property”
Hello,
I have the home loan with ICICI HFC sanctioned on 26/10/2016, and I have claimed an interest in sec 80EE for FY 16-17 & FY 17-18, but in July 2018 I have switched my loan to HDFC for the same property & loan. Shall I get the benefit of sec 80EE for FY 18-19? and which documents to be produced?
The deduction u/s 80EE for FY 18-19 is only available for the original loan sanctioned in FY 2016-17 and not for the new loan. Whether you have just switched the bank or is it a new loan?
Yes, I have switched the bank. the loan which I took from HDFC is for same property & to close my previous loan from ICICI.
Since the essence of the loan is same you can claim deduction of the repayment of loan
I HAVE TAKEN A HOME LOAN OF 4500000 FROM SBI AND I AM FIRST TIME HOME BUYER. HOW CAN I TAKE THE REBATE IN ITR FOR PRINCIPLE AMOUNT AS WELL AS INTEREST.
Claim house loan interest amount under income from house property (max 200000/- will be allowed in case of self-occupied property). Principle repayment amount is to be claimed as deduction u/s 80C.
As you say “Principle repayment amount is to be claimed as deduction u/s 80C.” however there is no option in the website to claim.
You will get a column to enter deductions u/s 80C in your ITR form. Please check.
Dear Sir/madam
I have purchased a new house and had a house loan of amount Rs 26 lakh (LIC-HFL), which was sanctioned on 26 March 2016. In Addition to this
I have taken another loan Rs 6 lakh from the same company, which was sanctioned on August 2017.
Q1 Can I get the benefit of Rs 50000/- under Section 80EE, However, In 80EE it is indicated that the benefit of 80EE can be taken by those who have been sanctioned Loan between 01.04.2016 to 31.03.2017 ??
Q2 Whether I can get the tax benefit from both the loan or not?
Ans 1- No you cannot claim deduction u/s 80EE.
Ans 2- You can claim interest deduction under “income from house property” for the loan amount.
I am paying 2,27,000 interest for my home loan. I have claimed 200000 under 24(b). Can I claim remaining amount under 80EE? My home loan approved on 22 Mar 2017.
Yes you can claim deduction u/s 80EE for the remaining amount of 27000/- if all other conditions of 80EE are also fulfilled.
I have purchased a house and taken the loan of amount Rs 26 Lakhs (LIC-HFL), which was sanctioned on 26 March 2016 and another loan of Rs 6 lakhs (LIC-HFL, sanctioned in August 2017) also taken for the furnishing of my same house. Can I get the benefit of Rs 50000/- from both the loan. But in section 80 EE, it has been stated that this benefit is only applicable to Loan sanctioned between 01.04.2016 to 31.03.2017. But in my case, both loans are not in between
No, you cannot take benefit of deduction u/s 80EE.
Hi,
I do the job in Pune and stay in a rented flat here with my husband.
I have a house property in my hometown on my name and show the rent received in “income from house property”. Home loan is over for this property in Feb 2017.
In March 2016, I and my husband have jointly bought another property in Pune for which we got possession in March 2018. We are repaying the home loan on this property. (This flat is rented out in April 2018).
Please let me know how can I take maximum tax benefit? I am confused because I read that if one owns 2 houses, one is to be shown as self-occupied and the other as rented out.
In my case, I own two houses but stay in the rented house. So I also want to claim HRA.
Regards
You cannot take H.R.A. exemption benefit if in that city you have your own house too. You need to show one house as self-occupied and other will deemed to be let out.
Very good article.
You have rightly mentioned that from AY2018-19, loss from house property allowed to be set off from other income is limited to 2,00,000rs.
Does this limitation apply for individual owning multiple flats?
Ex: I own (100%) a building with 12 flats. I have paid 6,00,000rs more interest than 70% of rent received. I have another flat on which I have paid 4,00,000rs more interest than 705 of rent received. I cant claim more than the Rs.2,00,000 loss from both of the above property?
Yes, the 200000/- set off limit is for losses under “income from house property” head which covers losses of all the house properties.
I have purchased a house property in April 2015, but the actual possession and the consideration were settled in 2013 itself, should I consider the date of purchases as 2015 or 2013 itself?
Since both possession and payment has been made in 2013, the purchase will be deemed to be in the year 2013.