Unravelling Home Loan Tax Benefits: A Comprehensive Guide

A home loan can fund up to 90% of property value, making it easy for many to buy their dream house. For those loan bearers, it also brings an opportunity to save on taxes according to the Income Tax Act, of 1961.

A housing loan applicant can find acquiring a home loan and its repayment to be costly and financially challenging. However, availing home loan tax benefits can save their money consistently.

Home Loan Tax Benefits

The following points outline how much tax benefit a loan bearer can get under various sections of the Income Tax Act 1961 with a focus on loan interest exemptions and tax deductions:

Section 80C

• Maximum deduction: Up to Rs.1.5 lakh
• Nature of tax deduction: A tax deduction is available on the repayment towards the principal amount under Section 80C.

Section 80C

• Maximum deduction: Up to Rs.1.5 lakh
• Nature of tax deduction: Deduction on stamp duty and registration charges is available.

Section 24(b)

• Maximum deduction: Up to Rs.2 lakh
• Nature of tax deduction: Under Section 24(b) of the Income Tax Act, tax deduction is applicable on the payment of interest if one fulfils the condition of completing or acquiring the house within 5 years.

Section 80EE

• Maximum deduction: Up to Rs.50,000
• Nature of tax deduction: Additional deduction is available for loan applicants for their first residence. To get this benefit the loan sanction date must be between 01.4.2016 and 31.3.2017. Moreover, the property value must not exceed Rs.50 lakh and the loan amount should be less than or equal to Rs.35 lakh.

Section 80EEA

• Maximum deduction: Up to Rs.1.5 lakh
• Nature of tax deduction: Under Section 80 EEA additional benefits are available over the allowed deduction of Rs.2 lakh. It means that taxpayers fulfilling the Section 80 EEA criteria can claim up to Rs.3.5 lakh of deduction on their home loan.

Joint Home Loan

• Maximum deduction: Up to Rs.2 lakh under section 24(b), Up to Rs.1.5 lakh under section 80C
• Nature of tax deduction: A joint home loan can attract tax benefits of up to Rs.2 lakh and Rs.1.5 lakh on the home loan and the repayment of the principal amount respectively.

How to claim tax benefits on a home loan?

After learning how much tax deduction is applicable it is imperative to know how to claim these benefits. Here is a step-by-step process:

Step 1: Gather documents like the loan statement, sale deed or property registration document, construction or purchase agreement and a completion certificate. These documents offer crucial information like amounts repaid towards principal and interest, a timeline of the property’s construction or purchase, and so on which a borrower has to use to claim tax deductions.

Step 2: Salaried individuals can submit these documents to their employers and can easily adjust their TDS. It adjusts their TDS and taxable income throughout the year and decreases tax liability each month.

Step 3: Individuals should declare the interest and principal amounts while filing their annual income tax returns under the relevant sections.

Many lenders offer their existing customers access to pre-approved loans for a variety of financial products, including property loans and house loans. In order to find out if they qualify for a pre-approved offer, candidates need to go to the lender’s website and fill out the required forms. Availing these offers expedites their loan approval process so they can access their desired amount in no time.

If individuals follow these steps methodically and maintain a file of all these documents for at least six years they can maximise their home loan tax benefits. This reduced tax liability can help one save significantly throughout the demanding loan repayment journey.