Tax benefits on home loan

Availing a home loan can be an expensive affair. However, the positive aspect is the tax benefits. An individual with a home loan can avail tax rebates and ease the tax burden substantially. Read the article to understand how to avail tax benefits.

What are the laws on home loan tax exemption?

Currently, property owners that have rented out their property, after adjusting the rent earned, can deduct up to Rs.2 lakh p.a. on the housing loan. Any amount over the Rs.2 lakh can be carried forward for eight assessment years.

Borrowers who have obtained a home loan and are residing in the same house are also entitled to deduct up to Rs.2 lakh only on the interest paid on the home loan.

However, if a property that is purchased is sold within 3 years, the profit from this sale will be taxed as per the tax slab the individual fall under.

What are the various tax benefits on a housing loan?

Home loans are qualified for tax benefits under three different sections of the Income Tax Act. Your home loan consists of two components: Principal and Interest. You may be eligible to claim tax benefits for these components based on certain criteria. For starters, you must be either the owner or co-owner of a home loan.

Interest payment under Section 24(b) it allows for tax deduction on interest payable on a loan taken to buy or construct a house.

·  You can also claim this benefit for repair or reconstruction of an existing property.

·  Processing fees and prepayment charges will also be treated as interest payment.

·  This benefit is available for residential and commercial property as well.

·  Owners of let-out properties can claim full interest payment, but exemption for self-occupied properties is restricted to Rs.1.50 lakh per annum.

·  This tax benefit is also applicable for loans taken from friends and family.

Principal amount under Section 80 C – A Hindu Undivided Family (HUF) or an individual can claim tax benefits on the principal of the home loan.

·  Commercial property and home renovations or additions on existing property is not eligible under Section 80C.

·  Life Insurance Premium, NSCs, EPF, ELSS can be claimed along with the home loan, subject to an overall deduction of Rs.1 lakh in a year.

·  The loan should be taken from banks, HFCs, Central & State governments, LIC, NHB, Public Company or a Public Sector Undertaking.

·  Stamp duty and registration charges are also eligible for deductions.


Tax deduction table


Deduction Section Maximum deduction Conditions
Principal 80c Rs.1.5 lakh Property should not be sold within 5 years of purchase
Interest 24b Rs.2 lakh Loan must be availed for purchase or construction and the property must be constructed with 5 years of availing the loan
Interest 80e Rs.50,000 Loan amount should not exceed Rs.35 lakh and the property value should not exceed Rs.50 lakh
Stamp duty 80c Rs.1.5 lakh This benefit can be availed only on the year that the stamp duty expenses are paid




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