Fri. May 10th, 2024
home loan, tax benefit

One of the most significant advantages of availing a home loan is the tax benefits attached to it. There are 3 sections of the Income Tax Act of 1961 that deal with tax benefits, namely, sections 24, 80C and 80EE. All these sections cover different components of home loan repayment and are explained in some details herein.

Section 24b Benefits and Features

Section 24b of the IT act covers income tax benefit on home loan interest payments. Any amount up to Rs. 2 Lakh that you pay as interest on your home loan is deductible from your taxable income.

  • The Rs. 2 Lakh cap is for self-occupied properties. In case you have rented out, there is no limit on the amount of exemption or the number of houses.
  • If the property is under construction, you can avail the full tax benefits for up to 5 years. Post the 5-year ceiling, the exemption amount comes down to Rs. 30,000.
  • Tax deduction under section 24b is on a payable or accrual basis. It means that you can claim these benefits even if no housing loan interest rate payments have been made on a particular year.

These benefits are on home loans from authorized lending institutions. Some of them also offer Home Loans of up to Rs. 5 Crore with minimum documentation and repayment tenors of up to 20 years.

Section 80C Benefits and FeatureHome Loan Tax s

Section 80C of the IT Act lays down the tax benefits on the principal repayment of home loans. Under this section, you can avail exemptions of up to Rs. 1.5 Lakh on repayment of the principal component of your home loan.

  • The upper limit of deduction, i.e. Rs. 1.5 Lakh, is fixed for both residential and sublet properties.
  • Properties which are under construction are not considered for the tax benefits under this section.
  • Income tax benefits on a home loan can be availed only on payment basis, which means that you can claim the benefits on the amount that you have already paid.
  • Registration fee and stamp duty are also eligible for deduction.
  • Under sub-section 80C(5), the tax benefits are reversed if the assesse forfeits the ownership of the property within five years of obtaining possession. In such a scenario, the tax benefits claimed shall be added as the income of the assesse on that year and taxed accordingly.

Section 80EE Benefits And Features

Section 80EE was re-introduced in the annual budget of 2016. Under this section, first-time home buyers can avail tax benefits of up to Rs. 50,000 for the interest component of their home loan. Note that these benefits are over and above the ones provided under sections 24b and 80C.

  • The loan must have been sanctioned before March 31, 2017.
  • The value of the property has to be under Rs. 50 Lakh and the loan taken must be less than Rs. 35 Lakh to be eligible for tax deductions.
  • You can avail these tax deductions until the time your loan has been completely repaid.

These are the home loan tax benefits every borrower should know. You may calculate these benefits easily using an online income tax calculator. Avail the full benefits of income tax deductions on your home loan and reduce your financial burden significantly.

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