Tax Benefits of Home Loan: Save on Your Taxes

Introduction:

The Indian government has shown great zeal to encourage its citizens to purchase a house. In the Union budget 2021, the government introduced additional tax benefits for homebuyers. Under the initiative, “Housing for All by 2022,” the government has launched the Pradhan Matri Awas Yojan (PMAY).

Thus, homebuyers can now avail the benefit of housing loans under the new income tax regime. Knowing tax benefits will ease the process of repayment of your housing loan. It will also help you to save up a certain amount on the housing loan. Let us learn about these benefits and what they are.

What are the tax benefits on home loans?

Learning about the tax deductions on your home loan is essential, especially if you are a first-time homebuyer. You must know the various provisions that offer tax benefits on home a loan so that you can receive them while filing your ITR. These are:

Section 24: As per Section 24, you can claim a housing loan interest deduction. You can claim income tax deductions in respect of your EMIs. A housing loan comprises of two parts, principal and interest. Under section 24, you can claim a total interest deduction of up to Rs. 2 lakhs if the construction of your residential property is complete. This fixed limit is only applicable in the cases of self-occupied property. In a let-out property, there’s no fixed upper limit.

What happens in the case where the property is under construction?

The Income Tax Act allows tax deductions on the interest paid during the pre-construction period in 5 equal instalments. You can claim it in five equal instalments after the construction of the property is fully complete within the limit of Rs. 2 lakhs.

Section 80C:

As per Section 80C, you will receive an income tax rebate towards the principal amount repaid on a home loan. You can claim this deduction within the limit of Rs. 1.5 lakhs. You must not sell your property within five years of possession to claim this tax benefit, or else it will be added to your income while filing ITR.

Additional Read: What is Section 80C? All you need to know

The government has extended additional tax benefits to homebuyers under Section 80EE and Section 80EEA.  Let us look at these tax deductions and conditions to be met in order to claim them.

Section 80 EE:

You can claim an additional tax deduction of up to Rs. 50,000, upon satisfying the following conditions:

- The loan amount availed by you is Rs. 35 lakhs or less.

- The value of your property is not more than Rs. 50 lakhs.

- The date of loan sanction is between 1^st April 2016 to 31^st March 2017.

- You are a first-time homebuyer and do not own any other house.

Section 80 EEA:

You can claim an additional tax deduction of up to Rs. 1,50,000, upon satisfying the following conditions:

- The stamp value of your property is not more than Rs. 45 lakhs.

- The date of loan sanction is between 1^st April 2016 to 31^st March 2017.

- You are a first-time homebuyer and do not own any other house.

- Lastly, you cannot claim deduction under Section 80EE.

Tax benefits in Joint Home Loan:

You can claim a tax deduction of up to Rs. 2 lakhs on the interest and a tax deduction of Rs. 1. 5 lakhs on the principal repayment. You can claim this tax benefit on your income if you are a co-borrower and co-owner of the property.

CONCLUSION:

To receive the tax benefits under the Income Tax Act for a home loan, you must cautiously apply them under the relevant provisions while filing your ITR.

Additional read : How To File ITR For Home Loan