Home loan is a financing solution that allows you to borrow funds to buy a land and other assets at a pre-agreed rate of interest and repayment tenor. Home loans are generally intended for the purchase or construction of a property. The government of India also shows a great leaning to encourage citizens to invest in a house. Due to government inclination there is home loan tax benefit; home loan is eligible for tax deduction under section 80C.

And if you buy a house on home loan, it will attract various tax benefits too that greatly reduce your tax outgo. The repayment of home loan comprises of mainly 2 constituents one is repayment of principal and other one is repayment of interest.

In this article, you will get to know about home loan tax benefit and how to claim home loan tax benefit.

Tax Benefit of Home loan

Here are the benefits of Home loan which can be claimed as Deduction;

Section 80C: Tax benefit on Home Loan (Principal Amount)

Under section 80C of Income tax act, amount paid as Repayment of principal amount of Home loan by an Individual and HUF is allowed as deduction.

1. You can claim a maximum home loan tax deduction of up to Rs. 1.5 lakh from your taxable income on the principal repayment.
2. This deduction may include stamp duty and registration charges as well but can claim only once.

This deduction includes investment in PPF account, Tax Saving Fixed Deposits; Equity oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme etc.

Section 24: Income Tax Benefit on Interest on Loan for Purchase/Construction of Real Estate

Under section 24 of the Income tax act, Tax benefit on home loan for payment of interest is allowed as a deduction.

1. In this section you can avail maximum deductions up to Rs. 2 lakh on the interest amount payable.
2. These deductions will apply only on the property whose construction is finished within 5 years.  

The Income from house property shall be deduct by the amount of interest paid on loan has been taken for the purpose of construction/purchase/renewal/repair and reconstruction of property.

Section 80EEA: Additional deduction under section 80EEA

Budget 2019 has introduced further deduction under section 80EEA for home acquirer for a maximum of up to Rs. 1,50,000.

For claiming deduction under section 80EEA, below mentioned conditions should be met;

1. The stamp value of property does not go beyond Rs. 45 lakhs.
2. The loan for home has been sanctioned between 1^st April 2019 to 31^st march 2021.

How to claim Home Loan Tax Benefit

How to claim Home loan tax benefit under section 80C?

You can claim income tax benefit under section 80C on home loan by following the below mentioned steps;

1. You can claim tax benefit under section 80C only if you file income tax return.
2. While filling the details in ITR form make sure that you have entered correct values in the various income heads as applicable to you.
3. Now in the next section of deduction under section 80C, you need to calculate the tax deduction you want to claim.
4. As the section 80C includes various other deductions like LIC premium, contribution to the provident fund. You need to assess how much of all the tax deductions available under the section you can claim.

How to claim Home loan tax benefit under section 80EE?

You can claim income tax benefit under section 80EE on home loan by following the below mentioned steps;

1. The tax benefit under section 80EE of income tax act is available on home loan sanctioned between 1^st April 31^st to March 2017.
2. For claiming deduction under section 80EE the borrower must not have any house on the date of loan sanction.
3. The deduction available under this section is subject to maximum limit of Rs. 50000.
4.  Under this section you can claim deduction on the home loan interest.
5. The deduction is available for a home loan of Rs. 35,00,000 and below also the value of property does not more than Rs. 5 lakh.

How to claim Home loan tax benefit under section 24B

1. You can claim deduction on the interest of the home loan, which is availed either for the purpose of constructing a new house or for the purchase of residential property.
2. The deduction on home loan interest is grant on an accrual basis.

Tax benefit on Home Loan

Deduction for joint Home Loan

If you have taken joint Home Loan, then each of the loan holders can claim a deduction for home loan interest up to Rs. 200000 each and the principal repayment u/s 80C is up to Rs. 150000 each in their individual tax returns.

For claiming this deduction, you should also be co-owners of the property taken on loan. So, a loan taken jointly with your family can help you in claiming a larger tax benefit.

Conclusion

The procedure for claiming tax benefits on a Home Loan differs with the type of borrowers, i.e., self employed and salaried. For claiming home loan tax deduction either on principal or interest paid, a borrower must have the property in his own name. After reading full article if you have any more further queries regarding claiming deduction or home loan tax benefit, you can contact us without any hesitation. For more information and assistance you can contact TAX ADVISORY. Tax Advisory is India’s leading legal service. You just need to call us directly on 9193555055.