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.
Dear sir, home loan principle and interest amount shown in form 16/16A upto December 2016 but my interest detected by bank upto march 2017. how many amount fill in ITR 1 for home loan interest( full 12 month /upto December) pls help
You can show amount for full 12 months in ITR. But in case of any query raised by department at time of processing of return then you can show the actual proof of interest amount.
Hello Team,
I have taken a home loan of Rs 22 lacs in May 2014 and this is my first home. I would like to know if I can claim of additional interest (above 2 lacs) while filing the ITR for year FY 2016-2017 / AY 2017-2018?
Appreciate your help and time to clarify. Thanks in advance.
you can claim deduction u/s 80EE for fy 2016-17 only when the loan has been sanctioned between 01.04.2016 to 31.3.2017. so no additional deduction can be claimed.
Thanks team..
But your response to Mr. Arpit Tiwari is different however both the cases are same.
Just curious to know the reason. Is it due to change is FY from 14-15 to 15-16.
Awaiting your response. Thanks in advance.
Hello Sir, I have taken home loan in May 2015 of 25 Lakhs. The value of property is 30Lakhs . Can I claim additional 50000/- deduction under 80EE from FY-16-17, apart form 1.5 lac under 80C, 2 Lacs under 24B, Appreciate your help and time to clarify
Yes you can claim additional deduction under 80 EE.
I have taken my first house/home loan of 32,60,000 in June-2016 and the total value of the house is 41,00,000. I have paid interest of 2,24,259 for financial year 2016-2017. Even though I have submitted the documents in my office, they have considered section 24 (interest 2,00,000) but not section 80EE. So what should I mention under section 80EE while submitting income tax returns. What I mean, do I have to mention 24259 (224259-200000) or 224259? Also, can I get this benefit only for this year or until the loan is repaid?
Thanks in advance.
You can claim balance interest u/s 80EE upto Rs.50000/-
Hello Sir,
I have taken a Home Loan of 2288765/- during December-2011 and started paying EMI from Jan-2012, can i claim additional 50000/- deduction under 80EE from FY-17-18, apart form 1.5lac under 80C, 2 Lacs under 24B, Appreciate your help and time to clarify
Thanks,
Nagaraj Mamedi
This was a new proposal which had been made in Budget 2016-17. The same will be continued in FY 2017-18 / AY 2018-19 too. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE.
The below criteria has to be met for claiming tax deduction under section 80EE.