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The Ultimate Guide to Home Loan Tax Benefits

lindapsanders January 15, 2021

Home loan is undoubtedly the most popular loan option in India. It empowers you to fulfil the most precious dream of your life.

A home loan comes with attractive interest rates, relaxed eligibility criteria, extended tenure, minimal documentation, flexible repayment, and many value-added benefits. Besides these, a home loan also allows you to get various tax benefits. This article lists the various home loan tax benefits you need to know before availing a loan.

Section 24 – Tax Benefits of up to INR 2 Lakh

If you want to get tax benefits on the interest component of a home loan, then Section 24 is all you need to understand. You can claim a tax deduction of up to INR 2 lakh every financial year. However, you can get home loan tax benefits under Section 24 only when you use the loan amount to purchase or construct a house. Additionally, the construction must be completed before five (5) years from the date of loan approval. The limit of INR 2 lakh applies to self-occupied property. In case you have rented your property, there is typically no upper limit. But, the maximum loss you can show from ‘House Property’ is capped at INR 2 lakh. Hence, for all practical purposes, home loan tax benefit on the interest component is INR 2 lakh. Remember, the lower the home loan interest rate, the lower the EMIs.

Section 80C – Tax Benefits of up to INR 1.5 Lakh

Section 80C enables you to claim tax benefits of up to INR 1.5 lakh every financial year on the principal component of a home loan. However, if you claim home loan tax benefits under this section, you cannot sell your house before five years from the date of loan approval. The home loan amortization schedule contains all details about the principal and interest component of a home loan. To get the detailed amortization schedule, open a home loan EMI calculator and enter details like loan amount, tenure, and interest rate.

Section 80C – Deduction For Registration and Stamp Duty

Beside home loan tax benefits for the principal component, Section 80C also enables you to claim a tax deduction for property registration charges and stamp duty. Note that this deduction can be claimed only once during the loan tenure. Moreover, the maximum limit of tax benefits under Section 80C is capped at INR 1.5 lakh.

Joint Home Loan Tax Benefits

To increase home loan eligibility and the odds of loan approval, borrowers often rope in a co-applicant and apply for a joint home loan. You can apply for a joint home loan with your spouse, sibling, son, or daughter. In the case of a joint home loan, both applicants become eligible to get tax benefits under Section 80C and 24. However, the tax benefits of a joint home loan depend on the amount paid and the proportion of the EMI paid by each borrower.

Conclusion

Besides an attractive interest rate, a home loan also makes you eligible to get tax benefits. You can use a home loan EMI calculator to calculate the loan’s actual cost after tax deductions. Such estimation can help you to apply for the right loan amount depending on your needs. Hence, before availing a home loan, ensure that you understand the tax benefits to choose an appropriate amount.

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