Navigating Home Loan Tax Benefits: Key Considerations

The government of India has always encouraged home ownership and one of the many ways the government does so is by providing home loan tax benefits. In this article, we share with home loan borrowers everything they should know about home loan tax benefits and so, this article is a must-read for anyone repaying a home loan.

Navigating Home Loan Tax Benefits: Key Considerations

1. Section 80C of the Income Tax Act deals with several different tax-saving options and one of these options is the principal component of home loans. If you are repaying a loan, you can claim tax benefit on payments made towards the repayment of the principal component of your home loan up to a maximum of Rs.1.5 Lakh per annum.

2. If a homebuyer sells their home within 5 years of buying it, the tax benefit they had claimed under Section 80C over the last five years gets reversed and added as income to the total income.

3. Section 24b of the Income Tax Act deals with tax benefits that one can claim on the interest component of one’s loan. The maximum limit permissible under this section is Rs.2 Lakh.

4. For under-construction properties, if construction on a property is not complete within five years of a person buying the property, the maximum tax deduction that one can claim under Section 24b automatically gets reduced to Rs.30,000 a year.

5. Joint home loan borrowers can claim tax benefits separately under both Section 80C and Section 24b of the Income Tax Act. Thus, a couple who has availed of a home loan together can claim housing loan tax benefits up to Rs.7 Lakh in any given financial year.

6. If a home loan borrower has more than two home loans, they can claim housing loan tax benefits on both home loans. However, it does not matter how many homes and home loans you have, the maximum limit permissible under Section 80C and Section 24b remains Rs.1.5 Lakh and Rs.2 Lakh, respectively.

7. Section 80EE of the Income Tax Act allows home loan borrowers to claim an additional tax benefit of up to Rs.50,000. However, this tax benefit is available only to those first-time homebuyers who had availed of a home loan in the financial year 2016–17. Further, the value of the property should not have been more than Rs.50 Lakh and the loan value must have been no more than Rs.35 Lakh.

8. Home loan borrowers who had invested in affordable housing between 2019 and 2022 and availed of a home loan to do so can claim an additional housing loan tax benefit up to Rs.1.5 Lakh provided the value of the home was no more than Rs.45 Lakh and they had no other property in their name at the time of processing of the home loan.

Also Read: Hra Vs Home Loan Tax Benefit

9. Home loan borrowers must also know that they can claim tax benefits under Section 80C only after the construction on the property is complete. Without the completion certificate, one cannot claim tax benefits under Section 80C.

10. Under Section 24b, one can claim tax benefits on payments made towards the repayment of the interest component of one’s home loan in five equal installments after the construction on the property is complete.