Top 5 Facts On Home Loan Tax Benefits In India

In India, home loan tax benefits play a pivotal role in encouraging individuals to invest in real estate and secure their dream homes. Under the Income Tax Act, several provisions have been made to ease the financial burden on homebuyers. One of the significant benefits is the deduction available on the principal repayment of the home loan under Section 80C of the Income Tax Act. This deduction, which falls within the overall limit of ₹1.5 lakh, provides relief to taxpayers by reducing their taxable income. Additionally, Section 24(b) offers tax benefits on the interest paid on the home loan, allowing a deduction of up to ₹2 lakh per annum for self-occupied properties.

For those who have rented out their property, the entire interest amount can be claimed as a deduction, leading to substantial tax savings. Furthermore, first-time homebuyers can avail an additional deduction of up to ₹50,000 under Section 80EE on the interest paid, provided the loan amount does not exceed ₹35 lakh and the property value is below ₹50 lakh. These tax incentives not only make homeownership more affordable but also serve as a catalyst for the growth of the real estate sector in India, empowering citizens to fulfill their aspirations of owning a home while enjoying valuable tax benefits.

1. Deduction on Home Loan Interest:

Under Section 24(b) of the Income Tax Act, homeowners can claim a deduction of up to ₹2 lakh on the interest paid on home loans for a self-occupied property. For properties that are not self-occupied, there is no maximum limit on the interest deduction.

2. Principal Repayment Deduction:

Under Section 80C, individuals can claim a deduction of up to ₹1.5 lakh on the principal repayment amount of the home loan. This includes both the principal amount paid through EMIs (Equated Monthly Installments) and any prepayment made towards the home loan principal.

3. Additional Deduction for First-Time Homebuyers:

First-time homebuyers can claim an additional deduction of up to ₹50,000 on the interest paid under Section 80EE. To avail of this deduction, the loan must be sanctioned between April 1, 2016, and March 31, 2017, and the loan amount should not exceed ₹35 lakh, and the property value should not exceed ₹50 lakh.

4. Tax Benefits for Joint Home Loans:

If you have taken a joint home loan with another individual, both co-applicants can claim deductions individually. This means that both co-applicants can claim deductions for the interest payment (up to ₹2 lakh each) and the principal repayment (up to ₹1.5 lakh each under Section 80C).

5. Tax Benefits on Under-Construction Properties:

For under-construction properties, the interest paid during the pre-construction period can be claimed as a deduction in five equal installments starting from the financial year in which the construction is completed. This can be claimed under Section 24(b).