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 did not find any condition for claiming deduction u/s 80C and u/s 24(b) that the property should not be transferred within 5 years or Completion should be made within 5 years. Kindly give me a reference where these conditions are stated.
Thank you.
Please refer to Section 24 (b) of Income Tax Act 1961
Dear Sir, I have purchased land and constructed house in 1260sqft. Loan sanctioned on 18-03-2022. The plot+construction value is 42lakhs. I paid interest in fy22-23 approx 162000/- but not claimed during ay23-24 itr3 form due to the house possession was given in Mar-2023. I have the let out the property and receiving 5200/- rent. Fy23-24 i will be paying 261000 interest. Can i claim overall interest (261000+(162000/5)) 293400/- under section 24b along with additional benefit of 150000/- under section 80EEA? I am unable to see section 24b in ITR3 form. I will show rental income as 62400/-. I am a salaried employee with 18.5lakhs salary. Please suggest.
I have deductions from other investments like PF, SS etc in section 80C already totalling to 1.5 lakhs. Is this benefit of 1.5 lakhs from Home loan principal repayment over and above the 1.5 lakh deduction from other investments in Section 80C ?
No, the principal repayment will be considered under section 80C and the maximum deduction allowed under section 80C is Rs 1,50,000.
Can I avail of exemption u/s 24 b when principal repayment is Nil?
Yes, you can claim exemption u/s 24 even when the principal repayment is NIL
A property of 1200Sq ft is jointly owned by Mr A and Mr B. And loan of 60 lacs is taken for this property purchase.
Can they claim sec 80EEA benefit? Since share of each in the property is only 600Sq Ft- within the limit of 645 Sq ft.
Yes they can take the benefit but the amount of Deduction does not exceed Rs 150000 and is allowed in computing the total income of the individual of Assessment Year beginning on 1st April 2020
Hi,
So, there is a property of 55L with ownership between A & B and a loan amount of 50L which is repaid only by B. Can B take the benefit of 80EEA for an additional 1.5L over Sec24 as each person’s ownership is halved between A & B?
Can I claim rebate of Rs. 50,000/- u/s 80ee (being already eligible), if the interest portion for said period is Rs. 2,18,000/-, out of which tax benefits of Rs. 2,00,000/- u/s 24(b) has already availed OR I should take rebate of only remaining amount of Rs. 18,000/-. Kindly advise keeping in view S. 80ee of Income Tax Act.
You can only claim the amount of Rs 18000 as you have claimed the deduction of Rs 200000 u/s 24(b).