A Guide to Tax Benefits on Home Loans in India

Buying a home is one of the biggest financial decisions you will ever make. Using a home loan can help you buy your dream property while also reducing your taxes. Compared to paying for your home in cash, using a home loan can help you save a large amount in taxes. In this blog, we will outline the sections of tax benefits on home loans. We will also give you useful information to ensure you take advantage of all the tax relief you should get. Let’s begin!

1. Section 80C – Deduction on Principal

Buying a home can help you save money through Section 80C as you can enjoy the home loan tax benefits. It lets you claim up to 1.5 lakh deduction annually for repayment’s principal part. You will also have to pay various stamp duties and registration fees.

Quick Checklist for Claiming Deductions

Here is a simple checklist to help you claim your tax deductions:

• Ensure that you obtain a statement from the lender that details how much of the main amount you have already paid off.
• Keeping a sale deed is a must to prove your property ownership.
• You must keep all receipts for payments you have made towards the principal amount of your loan.

*Important Considerations*

It is important to have at least 5 years of ownership at least for your property. It will help you to take advantage of this benefit. If you sell the property before this time is up, you will have to give back the home loan for tax exemption you claimed.

2. Section 24(b) – Deduction on Interest (Self-Occupied)

You can get an up to 2 lakh deduction for home loan yearly on your paid interest under section 24 (b). This is true for properties you live in after you take possession. This can really help reduce your taxable income.

Pre-Construction Interest

If your home is still being built when you take out the loan, don’t worry. It is also possible to make an interest claim you paid during construction. However, this amount can only be deducted in five equal parts and starting time will be once you move into home.

Section 24(b): Extra Benefits for Rental Properties

Section 24(b) provides even more home loans benefits if you choose to rent out your property. There is no limit on the amount of interest you can deduct for properties that you rent out. However, you can only offset ₹2 lakh against your other income from the rental property.

Carry Forward of Losses

You can carry forward the remaining loss to reduce your income for up to eight years. This is true if the total interest on housing loan you paid exceeds the ₹2 lakh limit. So, this is helpful for investors who want to grow and diversify their property portfolio.

Section 80EE: Extra Benefits for First-Time Buyers

Section 80EE helps you get more deductions of about 50,000 as first-time home loan tax benefit. It is approved between April 1st and March 31st. It will be implied if your home price is up to 35 lakhs. This deduction is on top of the benefits you can get from Sections 24(b) and 80C.

Section 80 EEA: Benefits for Affordable Housing

If you are a first-time buyer and your home loan is approved between the financial years 2019-20 and 2023-24, pay attention. This is because you might qualify for Section 80EEA. This allows you to claim an extra deduction of ₹1.5 lakh for homes valued up to ₹45 lakh. You could potentially increase your total interest deduction to ₹3.5 lakh (₹2 lakh + ₹1.5 lakh) with this. It can really help lower your taxable income.

Joint Home Loans: Maximizing Deductions

You can take out joint housing loans if you and a co-owner, like your spouse and you can double your deductions. Each co-owner can claim:

• ₹2 lakh for interest under Section 24(b)
• ₹1.5 lakh for principal repayment under Section 80C

This strategy works best when both fall under similar tax brackets. It allows you to maximize your tax benefits while sharing the financial responsibility of the loan.

*Pro Tip*

Make sure both names are included on the loan agreement and the sale deed to fully benefit from these deductions.

Old vs. New Tax Regime Rules

When it comes to house loan tax benefit, it is important to know the differences between the two options.

1. Old Regime

You can claim all the deductions mentioned earlier in the old tax regime. This makes it a great choice for homeowners.

2. New Regime

In the new tax regime, you can still deduct interest on rental properties. However, you lose the benefits for homes you live in. This means it is really important to compare both options before deciding which one is best for you.

*Quick Suggestion*

Consider using an online calculator to compare both tax regimes. This will help you see which one offers better benefits based on your financial situation.

Smart Ways to Max Out Your Savings

Timely Payments

Try to make your loan payments between April and June. This way, you can maximize the interest portion early in the financial year. It can lead to a bigger tax saving on home loans.

Utilize Subsidies

Check if you qualify for the PMAY, CLSS under the 2025 rules. This scheme is still available for Economically Weaker Sections (EWS) and Low-Income Groups (LIG). It can really help lighten your financial load if you qualify for benefits of home loan in income tax.

Top-Up Loans for Renovations

If you get a top-up loan for home renovations, the interest you pay on this loan can also be deducted under Section 24(b). This can further boost your tax benefits.

Annual Interest Certificate

Make sure to request an interest certificate from your lender every year. This document will be important for your HR department or Chartered Accountant when you file your taxes.

Conclusion

Taking advantage of tax benefits associated with home loans is a smart financial decision. Still, this is something many buyers overlook. You can significantly reduce your taxable income and save money. This is possible by utilizing the various sections of the Income Tax Act.

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Contact our team for the latest updates in our projects.

FAQs

Q: What is the maximum tax deduction I can claim on my home loan? 

A: You can claim a maximum deduction of ₹3.5 lakh on interest (including benefits from Sections 80EEA and 24(b)) and ₹1.5 lakh on the principal under Section 80C.

Q: Can I claim tax benefits if I take a joint home loan? 

A: Yes! Both co-borrowers can claim deductions separately while effectively doubling the benefit.

Q: What happens if I sell my property within five years? 

A: If you sell the property within five years, the deductions claimed on the principal repayment under Section 80C will be reversed.

Q: How do I choose between the old and new tax regimes? 

A: It depends on your financial situation. Best way is to use an online calculator to compare the benefits and choose the one that maximizes your savings.