Home Loan Tax Benefit under Section 24, 80C and 80EE

According to the provisions of income tax act, 1961 - Taking a loan for your home can provide you various tax benefits and help you in saving lots of money every year.

Tax rebate on Home Loan

As per budget 2019-20, the tax benefits given on home loan are specified in the table below –

Section Nature of Tax Deduction Maximum Tax Deductible Amount
Section 24 Interest Rs. 2 Lakh - Self-occupied House No limit – Let out property
Section 80C Principal (including stamp duty & registration fees) Rs. 1.5 Lakh
Section 80EE Additional interest (For first time buyers) Rs. 50,000

Home Loan Tax Benefits under Section 24 – Interest Deduction

This section deals with the yearly deductions you can claim on the interest payments done for home loan. Details for the same are given below -

  1. You can claim maximum deduction of Rs.2 Lakhs on interest payments in case your property is self-occupied.
  2. There is no limit on claiming deduction on interest payments in case you let your property out on rent.
  3. In case you are a co-borrower & co-owner of the house too, you can claim on each up to the maximum deductible amount.
  4. The maximum deduction of Rs. 2 Lakhs can only be claimed when you complete the construction of the property within 5 years. In case construction of your property does not complete under this duration, you can only claim up to Rs. 30,000
  5. In case you rent your property, you can claim any amount actually spent as interest (whether completed or not)

Home Loan Tax Benefit under Section 80C – Principal Deduction

This section deals with the yearly deductions you can claim on the principal of your home loan. Details for the same are given below –

  1. You can claim deduction up to Rs.1.5 Lakhs on both - self-occupied and let out properties.
  2. It is mandatory to complete the construction of the property in order to claim the deduction.
  3. In order to claim the deduction, you must not sell your property within 5 years after the possession.
  4. In case you sell your property within 5 years after possession, any deduction claimed by you in the year of possession will be reversed in the year of sale and the amount earned by you from the sale of property will also be added to your income of selling year.
  5. Under this section, you can also claim the amount of stamp duty & registration fees you paid for your property.
  6. In case you are a co-borrower & the co-owner, you can claim for each up to Rs.1.5 Lakhs as principal deduction.

Tax Benefits under Section 80EE – Additional Interest for First Time Home Buyers

In addition to the above tax benefits under Section 80EE, you can also claim many other benefits if you are buying a house property for the very first time. The interest deductions you can claim under section 80EE are as follows –

  • The loan sanctioning date must be b/w 1st April 2016 to 31st March 2017.
  • The value of the property must be less than Rs. 50 Lakhs.
  • The amount of home loan taken must be less than Rs. 35 Lakhs.
  • You can also claim amount up to Rs. 50,000 every year till you repay the loan.

Note – As per the recent finance budget 2019, there is a new section 80EEA introduced by the government. Under section 80EEA, now you can also claim additional deduction of Rs.1.5 Lakhs until you repay the housing loan.

Deduction for Joint Home Loan

In case loan is issued to two or more persons, each of them is eligible to claim deduction up to Rs.2 Lakhs on the interest paid. Tax can be deducted on the principal paid as well for an amount up to Rs.1.5 Lakhs each. In order to claim this deduction, it is mandatory for every applicant to be the co-owner of the property too. A joint loan taken for the home can provide you many tax benefits.

Home Loan Tax Benefits of Owning a Second Property

As per current provisions, if you are having two self-occupied properties, then one property will be accepted as self-occupied and for the other property you need to pay tax on the basis of notional rent. You have a choice that you can select any of the two self-occupied properties in order to avail the tax benefit.

As proposed in the finance budget, you can claim deduction on your second self-occupied home only if you let out the property on rent. It will save the owner’s money and you don’t have to pay any tax on the basis of notional rent. This will help you claim deduction on second property as well.

Steps to Claim Tax Benefits on Home Loan

Claiming tax benefits on home loan is a simple process. You need to take the following steps in order to claim tax benefits on home loan –

Step 1 – Calculate the amount of tax deduction

Step 2 – Make sure that the house property should be in your name or you are the co-borrower of the loan.

Step 3 – You must submit your home loan interest certificate to the employer in order to adjust the TDS.

Step 4 - In case you will not follow the above mentioned steps, you need to file the tax return yourself.

Step 5 – There is no need to submit these documents anywhere. You need to keep them in a secure place so that if in any situation income tax department wants to see that information, it should be readily available with you.

How to Calculate Tax Benefits on Home Loan?

You can easily calculate your tax benefits on home loan with the help of online calculator. Enter your home loan details, click on calculate and you are done. Detailed information will be displayed over the screen telling you the exact amount of tax benefits you can claim. Generally, the most common details needed to calculate the amount of home loan tax benefit are as follows –

  • Loan amount
  • Interest rate
  • Tenure
  • Loan starting date
  • Gross Annual income
  • Existing deduction under section 80C/80D

HRA & Tax Benefits

In case, you are living in a house on rent and also taken a home loan for your own house, you are entitled to claim not only the tax deduction on home loan but you can also claim the house rent allowance (HRA) on the rent that you are paying to the landlord. It can only be claimed if you are living in the house on rent. You cannot make a claim even in the case where your dependent family members are living in it without you. You can claim house rent allowance on the basis of lowest value of –

  1. Actual HRA received by you in the job
  2. 50% of your salary (if living in a metro city), 40% of your salary (if living in any other city)
  3. Actual rent minus 10% of the salary.

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