Home Loan Tax Benefits

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Learn About the Income Tax benefits on Home Loans

Key Takeaways

• You can enjoy various tax benefits on Home Loans under the Income Tax Act of 1961.
• You may claim tax benefits of INR 1.5 Lakhs under Section 80C towards principal amount repayments.
• You can claim tax benefits on Home Loan interest payments under Section 24 B.
• First-time homebuyers can claim up to INR 1.5 Lakh as tax deduction under Section 80EEA.
• Section 80EEA applies to Home Loans taken between 31st March 2019 and 1st April 2022.

Buying a home brings with it many advantages. It gives you the joy of becoming a homeowner, comes with flexible repayment tenures lasting up to 30 years, and allows you to buy any property you like. Additionally, you can enjoy numerous Tax Benefits under various Sections of the Income Tax Act of India, 1961. If you are a prospective homebuyer wondering, “how much tax can be saved on Home Loan?” this article is for you.

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Tax Saving on Home Loan

You may claim home loan tax benefits under the following sections of the Income Tax Act, 1961.

Section 80C

Section 80C of the Income Tax Act allows you to save taxes on various investments in India. It also applies to Home Loans.

• Homeowners can enjoy tax benefits of INR 1.5 Lakh on repaying the principal amount component of their Home Loan.
• You claim the deductions against stamp duty and registration charges in the same year of obtaining the loan.
• You may not sell the property for five years. If you do, all the claimed deductions are added to your taxable income, and you will be liable to pay those taxes.

Section 24 (b)

Under Section 24 (b), homeowners can enjoy tax deductions of up to INR 2 Lakh on repaying the interest component of the Housing Loan. The conditions to claim Income Tax benefits on Home Loan under this section are:

• You must reside on the property. Renting the property makes you ineligible to claim the benefit.
• If you use the Home Loan for construction of the property, you can claim deductions of up to INR 2 Lakhs on pre-construction interest in five equal instalments at the start of the year.
• The property must be constructed within five years, failing which the deduction is capped at INR 30,000.
• You should have bought or constructed the property after 1st April 1999.

Section 80EEA

As a first-time homebuyer, you can claim an additional INR 1.5 Lakh over and above INR 2 Lakh tax benefit under section 24 (b) towards Home Loan interest payment.

You must fulfil the following conditions to enjoy tax savings on Home Loans.

• The Home Loan must be sanctioned during the period starting from 1st April 2019 and ending on 31st March 2022.
• The stamp duty of the residential property must not exceed INR 45 Lakhs.
• You must not own any other property before the loan is sanctioned.

You may claim tax benefits under Section 80EEA if you buy a housing unit like an apartment or a flat, and not if you purchase plots.

You can use the Home Loan EMI Calculator to compute the payable EMIs, loan eligibility and more.

Final Note

While buying a home may involve several expenses, you can take respite in the fact that you can claim Home Loan Tax Benefits and reduce your costs considerably. Ensure you check all the benefits you are eligible for and utilise them to your advantage.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.