How to Claim Tax Benefits Available on Home Loans in India

The moment you reach adulthood, you start dreaming of building your own life, and that’s when you start wishing to have a home you can call your own. Fortunately for you, doing that has now become more feasible than ever before, thanks to the incredible facility of Low-Interest Rate Home Loans available in India. What’s more is that these Home Loans entitle you to avail numerous tax benefits. It is because the Indian Government encourages its people to invest in residential properties. 

So, if you are willing to apply for a Home Loan, or have procured one already, here is what you should know about the various Home Loan tax benefits in India. 

Tax Benefit on Interest Paid on Home Loan

If you have procured a Home Loan for a self-occupied property, you can claim a deduction of up to Rs. 2 Lakhs on the interest paid towards the mortgage. If you are repaying a loan on a let out property, you can claim a tax deduction on the interest. There is no upper limit in this case. Here are the aspects you need to keep in mind, before applying for this deduction:

This deduction on interest paid towards Home Loan can be availed under Section 24 of the Income Tax Act.

• The loan must be availed to construct or purchase a residential property.

The construction of the house should be brought to completion within 5 years from the end of the financial year in which you took the loan.

The deduction can be availed from the year in which the construction was completed.

If the construction of the property is not complete, you can place your claim for the pre-construction interest. In this case, once the development is complete, you can claim the deduction in five equal instalments, in addition to the deduction, that you are eligible to claim. However, you must remember, that even in this case the maximum amount for deduction is capped at Rs. 2 Lakhs.

Tax Benefit on Principal Repaid on Home Loan

You are entitled to claim a deduction of up to Rs. 1.5 Lakhs, towards the principal repayment on your Home Loan. Here are the aspects you need to keep in mind, before applying for this deduction:

This deduction on principal repayment towards Home Loan can be availed under Section 80 of the Income Tax Act.

To claim the deduction, you must not sell off the property, within the first 5 years of gaining possession. In case you make such a sale, the deduction that you claimed will be reversed in the year of the deal.

Tax Benefits on Stamp Duty and Registration Charges

You are entitled to claim a deduction for the cost incurred on account of Stamp Duty and Registration Charges at the time of purchasing your home. Here’s what you must know in this case:

This deduction on Stamp Duty and Registration Charges can be availed under Section 80C of the Income Tax Act.

• The deduction can only be claimed in the year when these charges were paid.

The deduction will be subject to the upper limit of Rs. 1.5 Lakhs, in conjunction with the tax benefits on the principal repayment for that year.

Tax Benefit for First Time Home Buyers

If you are buying a home for the first time, you can claim a deduction of up to Rs. 50,000. Here’s what you must know in this regard:

This deduction for first time home buyers can be availed under Section 80EE of the Income Tax Act.

The borrower must not own any other house, on the date of approval of the Home Loan.

• The Home Loan amount should be equal to or less than Rs. 35 Lakhs.
• The value of the residential property should be equal to or less than Rs. 50 Lakhs.

Tax Benefits for Joint Home Loan

In case the loan is taken jointly, then each of the loan takers is entitled to claim a deduction on the payment of the interest under section 24 as well as the principal amount under section 80 C. Here’s what you must know about this tax benefit:

In order to claim this deduction, the co-applicants of the loan should also be the co-owners of the residential property.

How to Claim Tax Benefits on Home Loan

At the time of filing your Income Tax Returns, you must look for a section called “Deductions”. In this section, in addition to any other benefits, you must also include:

• Deductions under Section 80 C
• Deductions under Section 24
• Deductions under Section 80 EE

To get the relevant deductions approved, you must be prepared to submit the below-mentioned documents:

• Proof of ownership of property

Loan Certificate, clearly indicating the division of the equated monthly instalment (EMI) into Principal and Interest components.

• Document stating the date of purchase of the property
• Completion certificate for the property’s construction
• Loan Agreement under the name of the taxpayer claiming the deduction
• Proof of payment of Municipal Taxes

We hope that you now know all that there is to about availing Home Loan tax benefits, and how to claim the same. So, wait no more before you avail this exciting loan, and take the much-awaited step of buying your own home!

Also Read: What are the Different Types of Home Loans in India?

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