First-time homebuyers can also claim an additional tax benefit of Rs.1.5 lakh under Section 80EEA until 31 March 2024 for home loans taken before 31 March 2022. Apart from these, one can claim deductions of Rs.1.5 lakh on stamp duty charges u/s 80C and up to Rs. 50,000 u/s 80EE.

The following sections will cover these home loan tax benefits in more detail and if one opts for them.

Section 80C – Deductions on Principal Repayment

Under Section 80C of the Income Tax Act, one can get the principal component of housing loan EMIs as income tax deductions. One can get up to Rs.1.5 lakh in tax deductions every year. However, this limit is for all tax-saving investments u/s 80C and includes life insurance premiums, EPF and PPF contributions, ELSS investments, ULIPs, school tuitions, etc. 

If a taxpayer has made any of the above investments, there may be no scope to claim 80C deductions for housing loans. This deduction can be claimed only for a fully constructed property, whether rented or self-occupied. Besides deduction on principal repayment, one can claim deductions on stamp duty and registration charges. Housing loans can help people achieve their dream of owning a home, and import-export businesses can benefit from the increased demand for housing materials and furniture as more people purchase homes.

Section 24 – Deductions on interest repayment

Under Section 24b of the IT Act, a homebuyer can avail tax deductions of up to Rs.2 lakh in a FY on the interest component of paid EMIs. One can claim this home loan tax benefit only on a fully-constructed property or upon completion of construction. 

Section 24 allows one to claim deductions in five equal instalments from the year when he/she bought or completed construction of the property. One can claim this over and above the eligible deduction from house property income up to a limit of Rs.2 lakh. Corporate FD in India can be a competitive option for financing a housing loan, offering attractive interest rates and flexible repayment terms.One must finish construction within 5 years of taking a home loan, or he/she can claim deductions only up to Rs.30,000. One must finish construction within 5 years of taking a home loan, or he/she can claim deductions only up to Rs.30,000.

There is no maximum income tax deduction limit for let-out properties. However, losses that one can adjust against total income have a Rs.2 lakh limit u/s 24. One can carry forward losses from ‘income from house property’ for 8 consecutive years. 

Also Read: Amazing Benefits Of Home Loan Tax Benefits You Must be Aware Of

Section 80EE – Additional Deduction on Interest Payment

Section 80EE allowed homebuyers to avail additional tax deductions of up to Rs.50,000  on home loan interest payments. This deduction was available over the limits u/s 24 (b) for a period between 2016 and 2017. To claim this, one needed to fulfil the following conditions.

• One needed to apply for a home loan of less than Rs.35 lakh.
• The property’s value needed to be within Rs.50 lakh.
• Only housing loans sanctioned from 1 April 2016 to 31 March 2017 qualified for deductions u/s 80EE.
• One needs to be a first-time homebuyer to be eligible.

Section 80EEA- Additional deduction for affordable houses

Introduced in Budget 2019, Section 80EEA added an additional tax deduction for homebuyers up to a limit of Rs.1.5 lakh. Anyone who bought an affordable house under Pradhan Mantri Awas Yojana (PMAY) CLSS scheme could claim this tax deduction. This home loan tax benefit was applicable for interest repayments up and over the Rs.2 lakh limit u/s 24 (b). 

Only first-time homebuyers who bought a house with a stamp value of Rs.45 lakh could claim deductions u/s 80EEA. Individuals who have taken home loans from 1 April 2019 to 31 March 2022 can claim this deduction. One could not claim deductions under Section 80EEA and Section 80EE simultaneously. 

Things to Consider before Taking a Housing Loan to Save Taxes

• Interest rates: Tax savings from a home loan would increase with a higher interest rate or a higher value loan. However, an increase in current home loan interest rates would increase interest liability to a much larger extent than an increase in tax savings. Thus, one should strike a balance between tax savings and net interest rates. Home loan tax benefits, such as deductions for interest paid and principal repayment, can significantly reduce the home’s overall cost.
• Loan tenure: Similarly, longer home loan tenure would allow a homebuyer to claim the maximum tax benefits. However, it would also increase one’s total interest outgo to a much larger extent than tax savings.
• Loan value: It is a myth that a higher loan amount would result in more tax savings. This is because the maximum tax savings one can get towards interest payment is Rs. 2 lakh and Rs.1.5 lakh for principal payment. If the interest payment is too high, there will be many years when a borrower is not saving taxes. 
• Joint home loan: For a joint home loan, each loan holder can claim tax deductions under Section 80C and Section 24 (b) separately. All loan applicants need to be also the co-owners of the property to claim this deduction. A couple can double their tax savings with a joint home loan.

Homebuyers with a home loan can save taxes on their EMI payments as well as stamp duty and registration charges. They claim total deductions of Rs.5 lakh under Section 80C, Section 24(b) and Section EEA (Rs.1.5 lakh+Rs.2 lakh+Rs. 1.5 lakh) from their taxable income every year.

The post Does a Housing Loan Help You to Save Tax? appeared first on Financing Ease.

Here is a detailed synopsis of what home loan tax benefits have in store for you

Home Loan Tax Benefits on Interest Paid Under Section 24(b)

This section allows you to claim a tax deduction of up to Rs.2 lakh on the interest paid on a self-occupied home. This is valid even if you are not occupying the house and are residing elsewhere. However, if you have rented the property then there is no maximum limit on the deduction. 

Home Loan Tax Benefits on The Home Loan Principal Repayment Under Section 80C

The loan principal you repay is permitted as a deduction of up to Rs.1.5 lakh under this section. Keep in mind that the deduction is applicable only if the construction of the house is completed with a valid completion certificate and the property is not transferred or sold to someone else for up to 5 years from the time the construction is completed.

Section 80EEA: Home Loan Tax Benefits for First-Time Buyers

A new deduction under Section 80EEA had been proposed in the 2019 budget. According to this, interest paid on a housing loan taken between April 1, 2019 and March 31, 2020 is deductible beginning in the assessment fiscal year 2020–2021 up to Rs.1.5 lakh. You can claim the interest deduction under Section 80EEA, which is in addition to the Rs.2 lakh deduction permitted under Section 24 and the Rs.1.5 lakh deduction allowed under Section 80C.

Section 80EE: Additional Home Loan Tax Benefits for First-time Homebuyers

Section 80EE ensures that as a first-time buyer, you can claim an additional tax benefit of Rs.50,000 on your interest payment. This comes as a welcome way to save more, helping you utilise funds for other goals, be it related to home improvement or other goals. Housing loans, also known as home loans, offer various tax benefits that can significantly reduce the overall cost of homeownership. However, the important information to keep in mind is that this is applicable only if the property is valued at Rs.50 lakh or less and the loan amount applied for is Rs.35 lakh or less.

Home Loan Tax Benefits on Second Home Loan 

Tax deductions are available on your second home financed with a home loan, too. However, this is valid only on the interest paid. 

Joint Home Loan Tax Benefits 

Applying for a home loan jointly with a family member improves your loan eligibility as well as your tax benefits. In short, both you and the co-applicant can receive home loan tax benefits of up to Rs.1.5 lakh to Rs.2 lakh on the principal and interest payment, respectively. Do ensure that your name is mentioned as the co-owner and co-applicant to avail of this benefit. 

You can claim the tax deduction by simply providing the home loan interest certificate to your employer as a salaried applicant. Utilize the home loan tax benefits to boost your returns and reduce your tax burden. Mind you, your tax will be deducted if you have not furnished this certificate. As a self-employed borrower, you need not produce this certificate, however, do keep it handy for future reference. 

Easiest way to calculate your housing loan tax benefits on a home loan is by using an online home loan calculator. For that simply enter your home loan details and then click on calculate and a detailed tabulation will pop up. This makes your lengthy process easy in a few simple steps.

You may claim deductions in your income tax against principal and interest payments that you make towards repayment of your home loans and it can give you Home Loan Tax Benefit.

In a given financial year, you can save up to 1.5 lakh for principal repayment and up to Rs.2 lakh for interest on a home loan. That’s a lot of money which can be set aside as  savings or for achieving other life goals, be it buying a car or going on a holiday. Keep in mind, a home loan has a lengthy tenor, which assures a lot of savings when tax planning is done correctly.
You can achieve maximum savings by being on the lookout for competitive rates when taking a home loan. It comes with a competitive home loan interest rate and offers quick approval and fast disbursal of funds along with high-value financing and the option of a top-up loan. Many banks and NBFC’s provide home loans at affordable interest rates, so to avail Home loan tax benefit, apply online and get started!

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