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.
I have repaid principle amount of Housing loan and yet Interest portion of the loan is due which I am paying @Rs.2800/- per month. I invest in PPF to the tune of Rs.150000/- annually and claim rebate under 80c. Please let me know whether I am eligible to claim exemption on Interest on HL that I am paying every month @Rs.2800/- ? If yes, under which section of IT?
Yes, you can take the benefits of housing loan. Interest paid is allowed under section 24b and repayment of principal amount is allowed as deduction under section 80C subject to maximum of 150000.
I have taken a personal loan on 2014 of 6 lacs. Sir kindly tell me if I can show to interest of the loan paying each year for tax benefit under “income from interest” option og my employer manage tax section or I need to provide the details during feeling ITR this year.
There is no benefits in Income Tax for personal loan. You cannot take the benefit of Interest on personal loan.
@SAG infotech – interest paid on personal loan taken for property purchase, renovation or construction of home loan can be waived under section 24
Hello,
I have taken a Home loan for 60 Lakhs and the property value is 70 Lakhs. This loan was taken along with my brother as a co-applicant and now I want to understand how can I claim the interest paid for the tax exception as the Section 80EE is not allowing to submit when the loan amount exceeds 35L and property value exceeds 50L.
Please help me out.
Sir,
we both govt employees have joint house loan account but deduction from on account.total interest is around 2.6 lakhs. can we use this for tax deduction one for 2 lakhs and another for 0.60 lakhs.
Interest will be bifurcated in ratio of shares of both joint assesse in house.
Sir I have availed 1st time home loan of Rs 25L in May 2015. In current FY my home loan interest is 206000 and principle amount is 350000. What was the deduction should I get under each section ?
For AY 2016-17, if the house is self occupied, then deduction of interest under section 24(b) is allowed upto Rs.2 Lakhs provided construction is completed within 3 years otherwise upto Rs.30000 is allowed and if House is given on Rent, then deduction of interest under section 24(b) is wholly allowed. The repayment of House Loan is allowed as deduction under section 80C maximum upto Rs.1.5 Lakhs whether the house is self occupied or let out.