What are the Home Loan Tax Benefits in 2024?

What are the Home Loan Tax Benefits in 2024?

Purchasing a home is one of the significant financial decisions one makes in their lifetime. To give it a push, the Indian government has come up with various home loan tax benefit options to encourage home seekers to invest in the home through a home loan. One of the most common home loan tax benefits generally availed by individuals is offered by Section 80 C, wherein up to Rs 1.5 lakh tax deduction is allowed on account of repayment of the principal component. And a home loan tax benefit of up to Rs 2 lakh can be availed on repayment of the interest component for the self-occupied property under Section 24b. Apart from this, there are other income tax benefits on home loans available to the home loan borrowers about which we will discuss below. 

Besides this, note that the government has also come up with numerous schemes, such as Pradhan Mantri Jan Dhan Yojana, which strives at bringing down the problem of accessibility and affordability. 

Income Tax Benefit on Home Loan in FY 2023-24

Have any idea about the income tax rebate on a home loan provided by the government? Here, we will look at numerous home loan tax benefits that one can claim against their home loan. 

Indian government provides home loan tax benefits under the IT Act of 1961. Home loan borrowers can avail the benefits of the tax deduction on interest under Section 24 (b), tax deduction on principal under Section 80C and additional home loan tax benefit for first time home applicants as per Section 80EE.

Such tax saving on home loans assists borrowers in saving a sizable component per year. Moreover, the Finance Minister - Nirmala Sitharaman, on 1st February 2024, in the Union Budget, extended additional tax deduction on interest paid of up to Rs 1.50 lakh for buying affordable homes by a year more. Thus, the home loan borrowers can avail of deduction on interest paid of up to Rs 3.50 lakh for a year more until 31st March 2022. Remember that such tax deductions are available as per Section 80EEA, which offers home loan tax benefits of up to 1.50 lakh on the interest component serviced through home loans. Such benefits on a home loan are available over and above the present exemption of Rs 2 lakh as per Section 24 b.

However, note that such deductions can just be claimed to buy houses available at a value of up to Rs 45 lakh. Homebuyers can claim such benefits on home loans if availed till 31st March 2022.  

Home Loan Tax Benefits under Section 80C

Section 80 C of the IT Act offers a home loan tax benefit linked to principal amount repayment. As per the section, the amount serviced as repayment of principal amount through home loan is permitted as a deduction for up to Rs 1.50 lakh. 

 Crucial terms for a tax deduction on home loan principal repayment based on Section 80C: 

• Such types of deductions are permitted after the home construction. Also, completion certificates must be awarded for obtaining such deductions. Such deductions cannot be permitted for periods under which the home was under the construction phase. 
•  Crucial point to be considered is that according to Section 80 (5), one cannot transfer their property if deduction under Section 80 has been obtained. These properties cannot be transferred for a minimum 5 years period from the end of the year when possession of the home was obtained. In case such properties are sold under a 5 year period, all the deductions that were permitted as a tax benefit in erstwhile years may be considered to be your income when you made such property sale. 

Home Loan Tax Benefits under Section 24B

According to the Section 24 b of the Income Tax Act, 1961, one can avail of home loan tax benefit on home loan interest amount. As per the Section, one can claim up to Rs 2 lakh tax deduction on the interest paid for a home loan for a self-occupied property. However, zero maximum limit applies in the situation of the property, which may not be self-occupied, is deemed or rented. A taxpayer can get a deduction of the entire amount paid as per Section 24. However, if the property owner owing to employment or occupation reason does not occupy the home and is living in another place, the maximum tax deduction permitted will be Rs 2 lakh. Property must be constructed or bought within a span of 5 years from the end of the financial year when the loan was drawn. 

Tax benefits on home loan as per Section 80EE

 Just the first time, home loan owners can claim home loan tax benefits as per Section 80EE. According to the section provision, an additional Rs 50,000 deduction may be permitted to those making payment of interest on their home loan. This specific incentive can be separate & in excess of Rs 2 lakh deduction permitted under Section 24 and deduction of Rs 1.5 lakh permitted as per Section 80 C. 

Crucial conditions for a tax deduction on first home loan interest according to Section 80EE

• Taxpayers must not be the owner of any other type of property when submitting the loan application. Property against which home loan is taken must be the first. 
• Property’s value must be up to Rs 50 lakh.
• Home loan taken must be up to Rs 35 lakh.
• Amount of such home loan must be disbursed to individuals between 1st April 2016 & 31st March 2017. 

Additional deduction on tax as per PMAY - CLSS scheme: Section 80EEA

To make purchasing homes affordable, the government has extended the interest deduction permitted for the low-cost housing loan to 31st March 2022. According to this new section of 80EEA, one can claim up to Rs 1.50 lakh deduction on interest paid for a home loan. 

For claiming the benefits, listed conditions must be met: 

• Stamp duty value of the house property must be within Rs 45 lakh. 
• You must not own a residential property on loan sanction date. 
• You must not be eligible for claiming a deduction as per Section 80EE of the IT Act.

Income Tax Benefit on Home Loan on Buying Second Property

 One can claim this tax deduction on availing of their second home loan but just on interest paid on a home loan. Presently, individuals can claim a home loan tax benefit just for the 1 property, which is self-occupied and conduct tax repayments basis notional rent. 

Income Tax Benefit on Joint Home Loan

Submitting a home loan application jointly not just enhances one’s home loan eligibility. It even renders home loan tax benefits. Those individuals taking up home loans jointly are given a choice to take up avail tax benefit individually. It implies that if 2 individuals have submitted an application for a joint home loan, each of them can claim the home loan tax benefit of up to Rs 2 lakh and up to Rs 1.5 lakh on their home loan interest and principal, respectively. Thus, the combined home loan tax benefit that they may enjoy can sum up to Rs 7 lakh only if they meet the required prerequisites. 

How to Claim Tax Benefit on Home Loan in India? 

The procedure for claiming home loan tax benefits is very simple and easy.

• Ensure you are the owner of the residential property. In the situation of a joint home loan, make sure to be the home’s co-owner. 
• Ensure to calculate the overall amount that you can claim in the form of tax deduction. 
• Ensure to hand over your company with whom you are working your home loan interest certificate to make sure they adjust the TDS. On failing to follow the step, you require filing your IT returns.

 A self-employed borrower requires not to submit such documents. They should keep them handy so that they can provide them right away in the case of any query in the future. 

FAQs

✅What is the home loan tax deduction in case of a joint loan?

 If a home loan is taken jointly, each home loan borrower can enjoy home loan tax benefits from their taxable income individually. Note that one can claim up to Rs 1.5 lakh on their principal amount paid and up to Rs 2 lakh on their interest amount paid. 

✅Is there any home loan tax benefit on a second home?

 In case you take another home loan, home loan tax benefits are applicable on payable interest components. In this case, you can claim the whole interest amount that is paid as no cap is applied to it. Presently, individuals can claim just one property in the form of self-occupied and make the tax payments on another notional basis rent. 

✅How to claim a home loan tax benefit? 

The procedure to claim the home loan tax benefit involves: 

• Ensure the residential property is owned by you. In the event of a joint home loan, make sure you are the co-owner of the home loan. 
• Calculate the overall amount that you can claim in the form of tax deduction.
• You should hand over the company with whom you are employed with your home loan interest certificate so that they can adjust TDS. Not following the step will require you to file IT returns. 

 A self-employed person does not require to submit any of the above-mentioned documents. However, they should keep required documents handy in the case of any query, which may come up in future. 

✅What is the highest amount eligible for a tax deduction for a home loan?

 The maximum tax-deductible amount for a home loan is stated below as per IT Act 1961:

• Up to Rs 1.50 lakh on the principal amount repaid as per Section 80C. 
• Up to Rs 2 lakh deduction under Income tax act on home loan interest amount repaid as per Section 24 b. 
• Up to Rs 1.50 lakh on interest repaid for only first time home buyers under Section 80EEA.

✅Who is eligible for Income tax exemption on a home loan? 

An individual who has bought a new home for self-occupation or to rent out can claim the tax exemption as per Section 24(b), 80C and 80EEA of the IT Act, 1961. Co-owners or co-borrowers of home loans can even claim home loan tax benefits.