Unravelling Housing Loan Tax Benefits: A Comprehensive Guide

If you are applying for a home loan or are repaying one, you must talk to a housing loan tax expert. With the help of housing loan tax benefits, borrowers can save significantly on their taxes each year. However, most people are completely unaware of these housing loan benefits. Here, we have tried to discuss these home loan tax benefits in as much detail as possible.

Unravelling Housing Loan Tax Benefits: A Comprehensive Guide

Section 80C

Section 80C of the Income Tax Act discusses many different tax-saving instruments and one of these is home loans. Section 80C states that home loan borrowers repaying a home loan can claim home loan tax benefits on the principal component of their home loan up to a maximum of Rs.1.5 Lakh. However, if a borrower sells their home within 5 years of purchasing it, the home loan tax benefit they had claimed during the first five years gets reversed and added as income in the year the sale has been made. Further, joint home loan borrowers can maximize housing loan tax benefits by claiming tax benefits separately under this section of the Income Tax Act.

Section 24b

As opposed to Section 80C of the Income Tax Act which deals with several different tax-saving instruments, Section 24b of the Income Tax Act concerns itself with only tax benefits available on the interest component of a home loan. The maximum limit permissible under this Section is Rs.2 Lakh. However, in the case of home loans availed of to buy under-construction properties, if the construction on the property does not get complete within five years of one availing of the loan, the maximum benefit that one can claim under Section 24b automatically gets reduced to Rs.30,000 a year. Also, yet again, joint home loan borrowers can claim tax benefits separately under Section 24b of the ITA. Thus, combined joint home loan borrowers can claim tax benefits up to Rs.7 Lakh under Section 80C and Section 24b.

Section 80EE and Section 80EEA

Section 80EE and Section 80EEA were introduced to provide relief to first-time homebuyers and promote investments in affordable housing projects. The maximum limit permissible under Section 80EE is Rs.50,000 and under Section 80EEA, it is Rs.1.5 Lakh. However, one can claim tax benefits under these sections only if one meets all the qualifying criteria. Below we discuss the eligibility requirements for claiming tax benefits under both these sections.

Eligibility Requirements for Section 80EE

To be able to claim housing loan tax benefits under Section 80EE, one must meet the following conditions:

1. The value of the home purchased with the loan money must be no more than Rs.50 Lakh.

2. The loan must have been sanctioned between April 1, 2016 and March 31, 2017.

3. The loan borrower must have had no other property under their name at the time of applying for the loan.

Eligibility Requirements to Claim Tax Benefits Under Section 80EEA

1. The value of the property purchased with the loan money must have been no higher than Rs.45 Lakh.

2. The loan applicant must have borrowed a home loan between April 1, 2019 and March 31, 2020.

3. The loan applicant must have no other property under their name.

If you are repaying a property loan, you must talk to a home loan tax expert about how you can maximize the tax benefits available to you.