Income Tax Benefits on House Loan

To encourage individuals invest in houses the Government of India provides tax benefits on house loans. Several deductions under Section 80(C), 24B, EEA, and EE are available so individuals can reduce their tax liability. However, these are only available under the old tax regime. If one follows the new tax regime, then deduction u/s 24B is available if an individual has rented out the house taken on a loan. More information on home loan tax benefits is as below.

What are the different types of tax benefits available on house loan?

Apart from benefits, lenders also provide pre-approved offers on secured and unsecured instruments to benefit their loyal customers. As a result of these offers application process for availing loans becomes seamless. However, to check their pre-approved offers, individuals must enter their names and contact numbers. The following are the different tax benefits of home loan that borrowers can claim by investing in house property.

1. Section 80C – Deduction on home loan principal amount and stamp value

Under this section, the following deduction is available.

  • A maximum tax deduction of up to Rs.1.5 lakh is available on the principal amount of home loan, paid in the concerned financial year (FY).
  • Deductions on stamp duty and registration charges are available. However, one can claim it only once and in the same FY. Also, it should not exceed the Rs.1.5 lakh amount.

2. Section 24B – Deduction on home loan interest payment

This is another deduction available under income tax benefit on home loans:

  • Here a maximum deduction of Rs.2 lakh is available on taxable income for the interest on the loan paid.
  • However, the concerned property must complete its construction in 5 years to claim this. If not, it will reduce the tax savings and other advantages offered by home loans to only up to Rs.30,000.

3. Section 80EE & 80EEA – Deduction on home loan interest for first-time homebuyers

Deductions under these sections are available only when the borrower has no other property registered under his/her name. 80EE provides tax benefits if:

  • the principal value of a home loan does not exceed Rs.35 lakh.
  • the property value is less than Rs.50 lakh.

Under 80EEA, taxpayers can:

  • claim a deduction of Rs.1.5 lakh on the interest amount paid besides the interest rebate available under Section 24B.
  • keep claiming this amount until he/she services the full loan.

Individuals must remember these tax deduction on home loans is available only for a completely constructed property.

Tax benefits available to joint home loan holders

Tax benefits on joint home loans are available under Section 24B and Section 80C, in which both joint holders can claim Rs.1.5 lakh and Rs.2 lakh, respectively and individually. As a result, the deduction available under the home loan doubles. However, both parties shall service the EMI.

Tax benefits on second home loan

After the amendment, individuals can enjoy home loan tax benefits on a second home loan too. After FY 2019-20, taxpayers can declare two houses as self-occupied. Thus, the government cannot consider the second house ‘deemed to be rented out.’ This attracted tax on a notional rent amount.

Calculating tax deductions to estimate the overall loan cost can take time and effort. This is especially when an assessee has to keep many terms under consideration. So, for this purpose, one can use the income tax calculator which is available online. It helps give the exact tax liability and saving amount on home loan.

Tom Austin
Tom Austin

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