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Home Loan Benefits - Income Tax Deductions and Tax exemption on Housing Loan.

October 31, 2019

Home Loan Benefits

What Are The Tax Benefits for Home


People are getting more invested in sourcing their incomes to properties that will generate more profitable income in the future. It is a known fact that the amounts that you spend on rents are ‘dead money’, in a way. Whereas, if you are buying a property and paying monthly EMIs then you can at least be happy about the fact that you are spending the amount on a property that is owned by you. At least for some, it is the right decision to make!

As repercussion of the above said scenarios, you will be in the lookout for home loans and the most appropriate financial institutions that provide you with home loans and benefits that comes along with it. It is very vital that you know the tax benefits that you are eligible for on availing house loans. There have been lots of amendments in the Tax Laws recently and there are lots of tax benefits for home loan buyers. This article familiarizes you about the various tax benefits available for home loans…

What are the Home Loan Benefits under Income Tax Act?

Section 80C and Section 24 of Income Tax Act reserves the laws pertaining to the benefits that home loan buyer are eligible for. Under these sections, repayment of home loan is qualified for the following criteria:

Section 80C
  •  Tax deduction of up to RS.1.5 lakhs can be availed by taxpayer for principal repayment on a home loan under this act.
  • Home loan buyers can claim benefits for expenses like stamp duty charges and registration fees under this section.
Section 24
  • The home loan buyer can avail the tax benefit of maximum of RS.2 lakh even if the interest amount exceeds the said amount. If the interest falls behind RS.2 lakh, the taxpayer can only avail that amount. For loan availed for house renovation the eligibility of tax benefit is a maximum of RS.30000 per FY.
  • Processing fees for the sanctioned loan, service fees or repayment fees can be claimed for tax deductions. These expenses can be added to the interest paid during the FY for claiming the home loan buyer’s eligible tax benefits.

When to Avail Tax Benefits?

Tax benefits coming under Section 80C and Section 24 of Income Tax Act can be claimed only from the FY during which the house is occupied or construction is completed. Properties that are ‘under construction’ are not eligible for any tax benefit.

For the interest paid in prior to the FY when the house was acquired, tax benefit coming under Section 24 can be claimed in equal installments over the next 5 years. This will include the FY in which the house was occupied.

Section 24 allows the house loan buyers to claim benefits if the construction of the house was completed or the house has been acquired within 5 years from the FY when loan was taken. When a home loan buyer fails to meet this condition, then the tax benefit for the interest paid shall be limited to RS.30000 per FY.

For properties under construction, the home loan buyer shall not be eligible for any tax benefit for the principal amount repaid even if he was paying the full EMI during the period.

What Are the Additional Tax Benefits Available For Home Loans?

Additional tax deduction of RS.50000 per annum (Section 80E.E) for home loan interest payment provided if:

  • The loan was sanctioned between April 1, 2016 and March 31, 2017
  • The loan amount availed does not exceed RS.35 lakhs
  • The total value of the property does not exceed RS.50 lakhs
  • The taxpayer does not own any house on the date of approval of the loan
  • The loan is taken from a bank or financial institution

Additional tax benefits of RS.1.5 lakh per annum (Section 80E.E.A) for the interest amount paid on home loan if:

  • The loan was sanctioned between April 1, 2019 and March 31, 2020
  • The stamp duty value of the purchased house does not exceed 45 lakhs
  • The taxpayer does not own any house on the date of approval of the loan
  • The loan is taken from a bank or financial institution

The above sections making the home loan buyer eligible for additional tax benefit supersede the benefit of RS.2 lakhs under Section 24.

The Section 80 E.E and 80 E.E.A is different from Section 24, in the fact that former are quite constricting than the latter. These stringent factors refer to loan sanctioning date, loan amount, the property worth and whether or not loan is availed from a bank or financial institution. Contradictorily,   Section 24 qualifies even a loan obtained from a friend or family member.

It is important to understand about the tax benefits that you are eligible for right from the time when you apply for loan. Make things transparent with the banks that you avail home loan services from. Hope this article guides you well in that regard!


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