To help you minimise the home loan repayment burden, the Indian Income Tax department allows you to claim certain income tax rebates on a home loan. According to the tax laws, you can claim deductions under sections 80C, 24b, and 80EE. Thereby, a housing loan also helps in reducing your income tax outflow.
Read more on various home loan tax benefits with regards to income tax in India.
Section 80C
Section 80C allows you to claim the following tax deductions in a financial year:
- Maximum of Rs.1.5 lakh on the registration charges and stamp duty in the year in which you incur the expenses.
- Maximum of Rs.1.5 lakh on the principal repaid on a home loan only once the construction is completed.
Conditions:
- You should not sell the house property within 5 years of taking possession, failing which the deduction claimed so far will be added back to your taxable income and taxed under your hands in the year of sale.
Section 24b
Section 24b relates to the deduction of interest portion paid on a home loan and allows you to claim the following in a financial year:
1) Interest:
- Maximum of Rs.2 lakh on the home loan interest payment only after the construction of a self-occupied property is completed.
- No maximum limit in case of a property to be let out. You can claim the entire amount as a deduction, irrespective of completion status.
Conditions:
In order to claim the above deductions, you must meet the following conditions:
- The house loan must be availed for the purchase or construction of a new house property.
- The construction has to be completed within 5 years from the date of availing the home loan, failing which the deduction limit falls to Rs.30,000.
2) Pre-construction Interest:
In case you buy an under-construction property and start paying EMIs immediately, you can still claim the pre-construction interest, but only on the completion of the construction. Such deduction is over and above the regular interest limit of Rs.2 lakh. You can claim a deduction on the total pre-construction interest paid in five equal instalments.
Section 80EE
Section 80EE pertains to tax benefits for a first time home buyer only. Under this section, you can claim an additional tax deduction of up to Rs 50,000.
Condition:
- Your home loan should be equal to Rs.35 lakh or less
- Your property value should be equal to Rs.50 lakh or less
- You must have availed the home loan between April 1, 2016, and March 31, 2017
Tax Deduction in Case of Joint Home Loan
In case you have availed a joint home loan, you and the co-applicant can claim tax deductions on the interest and principal amounts individually.
Tax Deduction in Case of Two or more Home Loans
In case you have availed two or more home loans, you can still claim tax deductions. For this purpose, you need to self-occupy one property and put the other on rent. Once you fulfill this criterion, you can claim tax exemptions.
Tax Deduction in Case You have Borrowed Home Loan from Relative or Friend
In case you have availed a loan from a family member, relative or a friend, you will not be eligible to claim tax deduction under Section 80C. However, you can claim a deduction on interest paid under Section 24 on presentation of a certificate of interest payment for the financial year. You must obtain such a certificate from the lender.
Now that you know how to claim income tax rebates on a home loan, plan your property purchase now. Start by evaluating your needs for a home and search for the ideal home right away!