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.
Submit Query for Tax Return Filing Software
Read Also: Tips to Save Income Tax in India
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.
Hi,
Kindly see the following scenario:
Husband and Wife purchased flat jointly in their name and house loan is also in joint name. But only husband earns and pays the EMI from his salaried account. Wife is a homemaker and do not earn. Total interest on home loan this FY is 360000/-. Can husband claim 200000/- u/s 24b or he can claim only 180000/- . Wife is not earning and hence dont want to claim any rebate.
Kindly share the supporting documents also.
IF HOME LOAN PRINCIPLE AMOUNT 150000 & INTEREST IS 200000 THEN HOW THE COUPLE CLAIM THE HOME LOAN BENIFIT?
Home loan principle amount can claim in section 80C And interest rebate can take under section 24 (b).
dear I have two home loan, 1st taken on 2018 and 2nd taken Sep2019
so 1st loan(interest 1.5lacs) cailmed as self occupy in 24B and 2nd loan (interest 1.5lacs) how to claimed for 80EEA as…. ?
“Following condition should be satisfy for claiming exemption under section 80EEA –
Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.
The loan should be sanctioned during the period 1st April 2019 and 31st March 2022.
Stamp duty value of the house property should be Rs. 45 lakh or less.
The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as of the date of sanction of the loan.
To claim the deduction under section 80EEA, ascertain the total interest portion during the year and claim a deduction of Rs.2 lakh under section 24(b). If the limit is exhausted, you can claim further deduction under section 80EEA up to Rs.1.5 lakh, subject to all other conditions for eligibility being satisfied.”
house property both less Rs. 45 lakh
but last i filled income tax return for 2nd load but 80EEA option got hide and 80EE option visible , why this heppend…..?
“Section 80EEA of the Income Tax Act, 1961, provides an additional deduction on home loan interest for first-time homebuyers of affordable housing. The deduction is available to individuals who are first-time homebuyers.”
MEDICAL TREATMENT OF HANDICAPPED DEPENDANTS U/S 80DD
Artificial leg (80% disability)change every year my son how can apply that
Hi,
Thanks for your wonderful article. I am trying to complete my ITR-2 and have a query.
For my Self occipied home , the home loan interest is much more than 2 Lakh, I am aware that I can get 2 Lakh deduction for this.
My question is where and how do I enter into the ITR-2 , so that the remaining house property loss , i.e. total home loan interest paid minus 2 Lakh, is carried forward for next years?
Kindly explain.
Only Loss in let out property is allowed for carry forward. In case of self occupied is no Loss is allowed to be carry forward.
Thanks for the quick revert.
Could you please point out to the IT act reference explaining this?
In IT Topup home loan interest considered or not
SIR,
I HAVE GET GROSS RENT FROM MY PROPERTY 6,00,000.00 AND I HAVE PAID HOME LOAN INTEREST 5,31,253.00. SO THAT HOW MUCH INTEREST TAKE IN SECTION 24 IN IT
In sec 24 A standard deduction Of 30% of annual rent value allowed after That In 24 B for let out house property full of amount of interest is allowed