Home Loan Tax Benefits - All about Tax Benefit on Your Home Loan

Home Loan Tax Benefit

The dream to own a house is really a challenging one. Challenging because it involves a huge investment which cannot be brought upfront by one and all. Banks and other financial institutions have given the option to every individual to make the dream come true by offering Home Loans at affordable rates. The Indian Government in a bid to encourage the investment in housing property has provided various tax benefits on the Home Loans availed.

What is Home Loan Tax Benefit?

The various tax deductions allowed under the Income Tax Act 1961 on the repayments made towards the Home Loan is the Home Loan tax benefit. Two components involving repayment of Home Loan are considered for availing the benefit. The components are the payments made towards the principal amount and the payments made towards the interest.

Since two components are involved, different Sections under the Income Tax Act govern the tax benefit. While filing the Income Tax Returns, these are claimed as Tax Deductions under various Sections of the Income Tax Act.

Also Read - Tax Benefit on Second Home Loan

Sections Offering Home Loan Tax Benefit

The various Sections offering Home Loan Tax Benefit are explained below:

Under Section 80C a deduction towards payment of principal amount can be claimed up to a maximum of 1.50 Lakhs. The only condition is that the house property should not be sold within 5 years of taking possession.

Under Section 24, a deduction towards the interest component can be availed up to a maximum of 2 Lakhs. The Home Loan should have been taken for purchase/construction of a house. The construction of the house should be completed within 5 years from the financial year when the Home Loan was availed if the loan is taken for construction.

Under Section 80EE, a maximum deduction of 50,000 is permitted if the value of the property does not exceed 50 Lakhs and the loan availed does not exceed 35 Lakhs. Also, the individual should not be owning another house property while availing the Home Loan.

Under 80C expenses incurred towards stamp duty to the extent of 1.50 Lakhs can be claimed only in the financial year when the expenses are incurred.

Also Read - Income Tax Documents Required for Home Loans

Types of Home Loan Tax Benefits Available

The following are the Home Loan Tax Benefits available:

Interest paid on the Home Loan when the house is under construction

In the normal course, the deduction for the interest paid for the Home Loan can be claimed soon after the acquisition of a house or after the construction of the house is complete. But, even when the house is under construction you will have to service the interest paid towards the Home Loan. The Income Tax Act has made a provision to claim a deduction for the interest paid in the interim period i.e., from the date of availing the loan till the completion of construction, in 5 proportionate instalments which begins from the year of purchasing the house or completion of construction. The maximum limit of 2 Lakhs for availing the deduction towards the interest holds good.

For the interest component of the EMI towards Housing Loan

The deduction for the interest paid on the housing loan can be claimed only after the purchase of the house or after the construction of the house is complete. The structure should be completed within 5 years from the date of availing the loan. Under Section 24 a maximum deduction of 2 Lakhs in a financial year is permitted for the interest component of the equated monthly instalment (EMI) paid for the housing loan. The threshold limit for claiming a deduction for the interest component of the EMI is 2 Lakhs for a self-occupied house and there is no threshold limit for a property that is rented out from the AY 2018-19 onwards. This deduction is applicable from the year of completion of construction.

For the principal component of the EMI towards Housing Loan

Deductions for the principal amount of the EMI can be claimed to the extent of 1.50 Lakhs under Section 80C. If the property for which the housing loan is availed is sold within 5 years from the date of taking possession, the amount claimed as a deduction will be ploughed back as income for the year when the sale transaction takes place.

Registration and Stamp Duty

Apart from the principal component of the Housing Loan EMI, a deduction for the expenses incurred towards registration and stamp duty can be claimed under Section 80C. But the overall limit to be claimed under 80C should be maintained, i.e., both the amounts put together should not cross 1.50 Lakhs.

Deductions under Section 80EE

In addition to all the deductions mentioned above, a deduction to the extent of 50,000 is allowed under Section 80EE. To claim this deduction the housing loan availed should not be more than 35 Lakhs and the value of the property should not be over 50.00 lakhs. The person claiming a deduction under 80EE should not own another house at the time of availing the housing loan.

Deductions permitted for housing loans availed in joint names

Housing Loans availed in joint names by the family members can procure a greater benefit under the deductions for Home Loans. If the Home Loan is availed in joint names, each borrower can claim a deduction to the extent of 2 Lakhs under Section 24 and to the extent of 1.50 Lakhs under 80C in their individual IT Returns. For this, just availing the housing loan in joint names to enhance the loan eligibility amount will not suffice. The property should be held in joint names to be eligible to claim the deduction.

Also Read - House Rent Allowance v/s Home Loan: Which is Better Tax Saving Option?

Table of Summary of Home Loan Tax Benefit

The table below gives a brief insight to the Home Loan Tax Benefits

Section	Components of deduction	Amount	Conditions
Section 80C	Principal	1.50 Lakhs	The property should not be sold within 5 years of taking possession
Section 24	Interest	2 Lakhs	The property should be acquired or the construction should be complete
Section 80EE	Interest	50,000	The loan amount should not be over 35 Lakhs and the property value should not be over 50 Lakhs. The borrower should not be owning another property at the time of availing the loan
Section 80C	Registration and Stamp duty charges	1.50 Lakhs	The deduction can be claimed in the year when the sale transaction takes place and the expenses are incurred

You can also Check Loan Against Property without Income Proof and ITR

How to Claim Tax Benefits if You Took a Home Loan Top-up?

Banks offer top-up loans like Personal Loans which come without any end use restrictions. However, some banks offer top-up loans only for the purpose of repairs and renovations and relevant bills and other documents have to be produced to prove the end use.

If the top-up loan is used for repairs/renovation, then deduction of interest component to the extent of 30,000 can be claimed under Section 24. However, the total deduction for the interest paid on the housing loan and the top-up loan should not cross the maximum limit of 2 Lakhs as provided under Section 24. The interest paid over and above 2 Lakhs can be carried forward for a period of 8 years.

If the top-up loan is used towards construction of new house then deduction of principal amount also can be claimed under Section 80C provided the total deduction from the housing loan and the top-up loan does not exceed 1.50 Lakhs as stipulated under Section 80C.

Deduction towards the interest component of the loan can be claimed even if the EMI is not paid. This is because Section 24 indicates that deduction can be claimed for the interest paid as well as the interest that is to be paid.

Also Read - 15 Lakh Home Loan EMI Interest Rate

List of Banks Offering Home Loans and Their Interest Rates

The following is the list of Top Banks offering Home Loans and their interest rates (updated on 10.0.2019).

Name of the Bank	Rate of Interest (p.a.)
HDFC Bank	For Women For a loan up to 30 Lakhs: 8.60% to 9.10% For a loan above 30 Lakhs and up to 75 Lakhs: 8.85% to 9.35% For a loan of 75 Lakhs and above: 8.90% to 9.40% For others For a loan up to 30 Lakhs: 8.65 to 9.15% For a loan above 30 Lakhs and up to 75 Lakhs: 8.90% to 9.40% For a loan of 75 Lakhs and above: 8.95% to 9.45%
Punjab National Bank	Floating rate of interest for Women For a loan up to 75 Lakhs: 8.65% For a loan of 75 Lakhs and above: 8.70% Floating rate of interest for Others For a loan up to 75 Lakhs: 8.70% For a loan of 75 Lakhs and above: 8.75% PNB Pride Floating For a loan up to 75 Lakhs: 8.65% For a loan of 75 Lakhs and above: 8.70% PNB Max Saver for Women For a loan up to 75 Lakhs: 8.80% For a loan of 75 Lakhs and above: 8.85% PNB Max Saver for Others For a loan up to 75 Lakhs: 8.85% For a loan of 75 Lakhs and above: 8.90% No fixed rate of interest option for PNB Max Saver Fixed Rate for Housing Loan General Floating rate + 0.50% Fixed rate for PNB Pride Floating rate + 0.50% Floating Overdraft Home Loan 9.85%
Kotak Mahindra Bank	For salaried: 8.90% to 9.05% For self-employed: 9% to 9.25%
Canara Bank	Housing Loan/ Housing Loan to NRIs/ Housing Loan to Agriculturists/ Yuva Awas Rin (CANYAR)/ PMAY/ HOUSING Loan to Senior Citizens/ Housing Cum Solar Loan For CIC Risk Grade Irrespective of loan limit: 8.70% For other categories For a loan up to 30 Lakhs: 8.75% for women and 8.80% for others For a loan above 30 Lakhs and up to 75 Lakhs: 8.85% for women and 8.90% for others For a loan of 75 Lakhs and above: 8.90% for women and 8.95% for others Housing Loan CRE For CIC Risk Grade Irrespective of the loan amount: 9.20% Housing Loan CRE for other categories For a loan amount up to 30 Lakhs: 9.25% for women and 9.30% for others For a loan amount above 30 Lakhs and up to 75 Lakhs: 9.35% for women and 9.40% for others For a loan amount of 75 Lakhs and above: 9.40% for women and 9.45% others Canara Home Plus For Term Loan: 9.20% For Overdraft: 9.70%
ICICI Bank	For Salaried Individuals For a loan up to 35 Lakhs: 9.05% For a loan above 35 Lakhs up to 75 Lakhs: 9.15% For a loan above 75 Lakhs; 9.20% For self-employed For a loan up to 35 Lakhs: 9.10% For a loan above 35 Lakhs and up to 75 Lakhs: 9.20% For a loan above 75 Lakhs: 9.25%
Corporation Bank	Corp Home Loan Floating Rate For employees of State/ Central Government Departments/ Defence Personnel up to 2 Crores: 8.60% For others up to 2 Crores: 9% Above 2 Crores: 9.25% Corp Home Loan Fixed Rate For a loan up to 25 Lakhs: 12% For a loan above 25 Lakhs: 12.50% For Pradhan Mantri Awas Yojana: 9% For Corp Ghar Shobha: 9.40% For Corp Ghar Sansar: 9.40%
Yes Bank	Interest rate ranging from 9.85% to 12%
SBI	For salaried class 8.60% for a loan up to 30 Lakhs with LTV 80% and 8.70% for LTV above 80% to 90% For a loan above 30 Lakhs up to 75 Lakhs 8.85% to 8.95% depending on the risk rating For a loan above 75 Lakhs 8.95% to 9.05% depending on the risk rating. For other than salaried class For a loan up to 30 Lakhs with LTV 80%: 8.75% For a loan up to 30 Lakhs with LTV above 80% to 90%-8.85% For a loan above 30 Lakhs and up to 75 Lakhs: 9% to 9.10% depending on the risk rating. For a loan above 75 Lakhs: 9.10% to 9.25% depending on the risk rating. Max-Gain for salaried class For a loan above 20 Lakhs to 30 Lakhs with LTV 80%: 8.65% For a loan above 20 Lakhs to 30 Lakhs with LTV above 80% to 90%: 8.75% For a loan above 30 Lakhs and up to 75 Lakhs: 8.95% to 9.05% depending on the risk rating For a loan above 75 Lakhs up to 3 Crores 9.10% p.a. to 9.20% Max-Gain for other than salaried class For a loan above 20 Lakhs to 30 Lakhs with LTV 80%: 8.85% For a loan above 20 Lakhs to 30 Lakhs with LTV above 80% to 90%: 8.95% For a loan above 30 Lakhs and up to 75 Lakhs: 9.15% p.a.to 9.25% p.a. depending on the risk rating. For a loan above 75 Lakhs and up to 3 Crores: 9.30% to 9.40% p.a. depending on the risk rating. A concession of 0.05% provided for women beneficiaries For a loan above 3 Crores only for the existing SBI Home Loan borrowers: 8.45%.
HSBC Bank	For Regular Home Loan: 8.85% to 8.95% For Smart Home Loan: 9. 50% to 9.15%
Indian Overseas Bank	Housing Loan For a loan up to 30 Lakhs: 8.65% For a loan above 30 Lakhs and up to 75 Lakhs: 8.75% For a loan above 75 Lakhs: 8.90% Subhagruha Top-up: 12.15%
Syndicate Bank	For SyndNivas: 8.65% For SyndKuteer: 8.65% For Housing Loan CRE: 9.75% For SyndNivas Plus: 12% For SynDelight: 11.50%
Bank of Maharashtra	For a loan up to 1 Crore: 8.60% to 8.80% for salaried and 8.65% to 9.10% for non-salaried, depending on the credit score For a loan above 1 Crore: 8.70% to 8.90% for salaried and 8.80% to 9.35% for non-salaried, depending on the credit score
Allahabad Bank	ALL Bank Aashiana Scheme/ Housing Finance Scheme for NRI or PIO/ Premium Housing Finance Scheme for High Net Worth Individuals (HNIs) (for loan amount above 5 Crores)/ Housing Loan Scheme for Pensioner For a loan up to 75 Lakhs: 8.80% to 9% For a loan above 75 Lakhs and up to 5 Crores: 8.85% to 9.60% For a loan above 5 Crores: 9% to 9.60% 0.05% concession to women and salaried person For Housing Loan CRE: 0.25% above the rate applicable for housing loan.
Andhra Bank	For a loan up to 30 Lakhs with LTV 90%: 8.80% for women beneficiaries and 8.85% for others For a loan above 30 Lakhs and up to 75 Lakhs with LTV 80%: 8.80% for women beneficiaries and 8.85% for others For a loan above 75 Lakhs with LTV 75% 8.90% for women beneficiaries and 8.95% for others
Bank of Baroda	Baroda Home Loan: 9.70% p.a. Baroda Home Loan Advantage For a loan up to 75 Lakhs: 9.70% For a loan above 75 Lakhs: 9.95% Baroda CRE Housing Loan: 9.95% Baroda CRE Advantage For a loan up to 75 Lakhs: 9.95% For a loan above 75 Lakhs: 10.25%
RBL Bank	Starts at 10.45%
Indian Bank	For salaried class For a loan up to 30 Lakhs: 8.80% For a loan above 30 Lakhs and up to 75 Lakhs: 8.90% For a loan above 75 Lakhs: 9.05% Concession of 0.05% for women beneficiaries For other than salaried class For a loan up to 30 Lakhs: 8.85% For a loan above 30 Lakhs and up to 75 Lakhs: 8.95% For a loan above 75 Lakhs: 9.10% Concession of 0.05% for women beneficiaries
Union Bank	Home Loan Floating Rate of Interest For a loan up to 75 Lakhs with a credit score of 700: 8.70% For a loan of 75 Lakhs with a credit score less than 700: 8.80% For a loan above 75 Lakhs with a credit score 700: 8.75% For a loan above 75 Lakhs with a credit score less than 700: 8.80% Home Loan Fixed Rate of Interest For a loan up to 30 Lakhs: 11.40% For a loan above 30 Lakhs and up to 50 Lakhs: 12.40% For a loan above 50 Lakhs: 12.65% Union Home-Smart Save For a loan up to 75 Lakhs with a credit score of 700 and above: 8.95% For a loan up to 75 Lakhs with a credit score less than 700: 9.05% For a loan above 75 Lakhs with a credit score of 700 and above: 9.25% For a loan above 75 Lakhs with a credit score less than 700: 9.35%
Central Bank of India	Starts at 8.55%

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Home Loan Tax Benefit FAQs

✅ Can interest paid for a loan availed from friends and relatives for purchase/construction of a house property?

A deduction for the interest paid for a loan availed from friends and relatives can be claimed under Section 24 provided, a certificate is obtained from them. However, the person who issues the certificate is liable to pay tax on the amount so received since it will be treated as income for him/her.

✅ Can House Rent Allowance be claimed after availing tax benefits from housing loan?

If the possession of the house is taken and you have not occupied the house but given it out on rent, then you are eligible for tax benefit on the principal amount under 80C, tax benefit on interest amount under Section 24 and House Rent Allowance (HRA) benefit. However, the rent received will be treated as income and is taxable. If the house is for self-occupation then you cannot claim HRA benefit.

✅ Can a co-applicant for the housing loan claim the tax benefits if the EMI is serviced by the co-applicant?

The co-applicant can claim tax benefit only if he or she is the co-owner of the property for which the loan is availed.

✅ If a person has availed two housing loans for two properties can tax benefit for both the properties claimed under 80C?

The tax benefit can be availed for both the housing loans under 80C provided the total amount is within 1.50 lakhs.

✅ A loan is availed for an under-construction flat for which tax benefits have not been claimed. Can the benefit be claimed now for the instalments already paid?

The benefit for deduction under Section 80C and Section 24 can be claimed only after the property is acquired or the construction is complete. So, the benefit can be claimed from the year when the property is acquired or the construction is complete.

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