Don’t Forget About These New Home Loan Tax Benefits

No Comments

 New Home Loan Tax Benefits

Introducing a refreshing angle on home loans – are you fully aware of the often-overlooked tax benefits that can transform your homeowner experience? Don’t let these hidden gems slip away! Read this article to unravel the exciting area of home loan tax benefits, exploding your path to financial prosperity.


Deduction Under Section 24(b) of the IT Act, 1961

Section 24(b) provides for interest paid on house loans to be deducted, providing significant tax relief to homeowners. Borrowers can claim a deduction of up to 2 lakh per year on the interest part of their house loan EMIs under this provision, subject to certain criteria. This deduction applies to both self-occupied and rented residences, and it can greatly lower homeowners’ tax liability.

Deduction Under Section 80C of the IT Act, 1961 

Section 80C enables taxpayers to deduct the principal repayment component of their mortgage EMIs. Borrowers can claim a deduction on principal repayments of up to 1.5 lakh per year under this provision. This deducting mortgage interest is limited to a total of 1.5 lakh, which includes a variety of different investments and expenses such as provident fund payments, life insurance premiums, and education fees.

Also read: Concept of Housing Loans & EMI’s Business in India

Pradhan Mantri Awas Yojana (PMAY)

The government’s flagship scheme, PMAY aims to provide affordable housing for all by 2022. Under PMAY home loan, first-time homebuyers meeting certain income criteria can avail of additional tax benefits. Section 80EEA, introduced specifically for affordable housing, allows an additional deduction of 1.5 lakh on housing loan interest for first-time homebuyers. Further, Section 80EEB permits an extra deduction of 1.5 lakh on interest paid on loans sanctioned during the financial year 2019-20, subject to eligibility conditions.

Tax benefits on joint home loans

When multiple individuals apply for a home loan interest exemption as co-borrowers, each of them can claim tax benefits individually. Under the Income Tax Act, each co-borrower is eligible for housing loan interest deductions under Sections 24(b) and 80C, subject to their respective ownership shares and loan repayment responsibilities. This provision encourages joint ownership and facilitates affordable home buying for multiple individuals.

Also, read: Exploring Tax Saving Options Other than Section 80C of the Income Tax Act, 1961

Set-off of loss from house property

In the case of a self-occupied property, where the interest payment exceeds the rental income, the loss from the house property can be set off against income from other sources. As per Section 71 of the Income Tax Act, 1961 the unadjusted loss can be carried forward and set off for eight subsequent years. This provision limits the tax burden on homeowners and provides relief during lean rental income periods. 

Income Tax Benefits on Home Loans in Nutshells

Deductions Section Maximum Deduction (INR) Conditions
Principal 80C 1.5 Lakh The home should not be sold within five years of occupancy or ownership.
Interest 24b 2 Lakh The loan must be used to buy or construct a home and must be completed within five years from the end of the financial year in which the loan was received.
Interest 80EE Rs.50,000 The loan amount should be Rs 35 lakh or less and the asset value should not exceed Rs 50 lakh.
Stamp Duty 80C 1.5 Lakh It can only be claimed in the year in which the expense is incurred.
Interest 80EEA 1.5 Lakh The stamp value of the property must be Rs.45 lakh or less. Section 80EE deduction is not given to the individual taxpayer. 

Winding Up Note

Various home loan tax benefits under the Income Tax Act, 1961 have made homeownership more affordable and attractive for individuals. From deductions on interest and principal repayment to additional benefits for affordable housing loans and joint home loans, these incentives encourage individuals to invest in real estate and contribute to the growth of the housing sector. Individuals need to be aware of these provisions to avail themselves of the maximum tax benefits while fulfilling their dream of owning a home.

In case of any query regarding Home Loan Tax Benefits, feel free to connect with our legal experts at Legal Window at 72407-51000.

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

About us is a professional technology driven platform of multidisciplined experts like CA/CS/Lawyers spanning with an aim to provide concrete solution to individuals, start-ups and other business organisation by maximising their growth at an affordable cost.

Ask an Expert

More from our blog