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.
Sir,
I have taken sbi home loan in 2016- 17 financial year….in november 2019 work completed…now AY 2020-21, I calculated pre construction interest up to march 2019 divided in 5 equal part…now total interst for this year comes as 2,80,000/-(1,75,000/ +105000(1 part of precon interest)…can i claim 2 lac under sec 24b and 50,000/- under 80ee ie total 2,50,00/- in AY 20-21??( it satisfy condition of 800e deduction)
PLEASE REFER SECTION 24(b), 80EE AND 80EEA OF INCOME TAX ACT 1961
Dear Sir,
I have recently purchased a property, amounting to less than 45lakhs. And I’ll be able to move by eod of this month i.e. Nov 30, 2020. Here, before moving into that property, my interest paid towards the loan will stand for 45 days approximately around 30000/-. And after moving in can I claim house loan interest?
I request to help me with the current financial year what should I declare in the investment declarations to claim house loan interest paid (Considering Section 24 a,b, 80EE, EEA, etc). And this is my 1st property.
Appreciate and thankful for your advice in advance.
Thank you very much, sir.
PLEASE REFER SECTION 24(b), 80C, 80EEA OF INCOME TAX ACT 1961
Sir, Kindly let me know under what column the “repayment of housing loan” to be shown while filing the ITR-1 by e-filing for AY 2020-21. In the ITR-1 Form, under B2(v) the “interest payable on borrowed capital” appears. Whereas for section 80C of the Income Tax Act, the repayment of the principal amount of home loan column is not appearing the said ITR-1 Form. Kindly let me know where to show the repayment of the principal amount of home loan in the ITR-1 Form by e-filing for the AY 2020-21. Thanks
The repayment of the principal amount of the home loan is to be directly shown under chapter VI-A 80C Deductions.
Thank you Sir.
Hi,
I have 2 properties, one is self-occupied & the other is let out. For AY 20-21, the claim amount u/s 24 is 1.2 Lacs. However, I have a carry forward loss from the previous year of ~80,000. I have been filing ITR-1 till last year. To include the carry forward loss and claim complete 2 Lacs in current AY, do I need to file ITR-2?
Thanks
For claiming complete 2 lacs loss in current AY and for carrying forward of loss you need to file ITR-2
Hi, I and my husband have bought an under-construction apartment that can be possessed in 2023. The total property value will be 70 lac. and we have got a joint home loan of 65L.
1. whether can we avail of the tax benefit from now onwards or after the completion of the construction?
2. according to 80C, the total limit is 1.5L. the principal repayment limit is 1.5L. my doubt is that the Principal repayment limit is apart from the total 1.5L?
3. loan taken for 65 lac. now to avail additional tax benefit for the first time house buyer, can we bifurcate the 65 lacs and avail the benefit?
Thanks in advance
What is the reply given to Mr.Aswini, for his query, can I get this, thanks