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Multitude of Tax Benefits for Home Loans

Buying an own house is a dream for every individual. The Indian government has encouraged citizens to invest in property. Hence home loan is eligible for tax deduction under section 80C. The tax benefit doesn’t stop there. Home loan comes with a multitude of tax benefits that significantly reduce your tax outgo. Schemes like Pradhan Mantri Jan Dhan Yojana are a great boon to people who face issues of affordability and accessibility.

  1. Deduction for Interest Paid on Housing Loan

A home loan is usually taken for the purchase/construction of a house. The construction of the house must be completed within 5 years from the year in which loan was taken. The EMI for the home loan has two components – interest payment and principal repayment. The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh under Section 24.

  1. Deduction in respect of interest paid towards home loan during pre-construction period

If you are paying paying the EMIs for an under-construction property that you have bought, you can claim interest on the home loan as a deduction begins only upon completion of construction. The income tax law provides for the claim of pre-construction interest. However, the maximum eligibility is capped at Rs 2 lakh.

  1. Deduction on Principal repayment

The Principal part of the EMI paid for the year is eligible for deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. If the house/ property is sold within 5 years of possession, the deduction claimed earlier will be added back to the income in the year of sale.

  1. Deduction For Stamp Duty and Registration Charges

A deduction for stamp duty and registration charges can also be claimed u/s 80C. The overall limit of is rupees 1.5 lakhs. It can be claimed only in the year in which these expenses are incurred.

  1. Deduction for first time Home Buyers

Additional deduction under Section 80EE is allowed for first time home buyers for maximum up to Rs 50,000. To claim this deduction, the loan amount should be INR 35 lakhs or less and the value of the property should not exceed INR 50 lakhs. The loan must have been sanctioned between 1st April 2016 to 31st March 2017.

  1. Deduction for Joint Home Loan

If the loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest up to Rs 2 lakh each and principal repayment u/s 80C up to Rs 1.5 lakh each in their individual tax returns.


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