Taking a home loan can help you save tax as per the provisions of the Income Tax Act, 1961. Take a look at the tax benefits available under the act.

The repayment of Home Loan comprises of 2 components:

1. Repayment of Principal and

2. Repayment of Interest

As the repayment comprises of two different components, the tax benefit on home loan is governed by different sections of the Income Tax Act. Following are the benefits available on loan taken on House Property which can be claimed as deductions in the Income Tax Return:

1. Deduction on Principal Repayment (u/s 80C): The amount paid as Repayment of Principal of Home Loan taken by an Individual/HUF is allowed as deduction u/s 80C. The maximum deduction allowed u/s 80C is Rs. 1,50,000.This deduction is available on payment basis. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to the total income in the year of sale.

2. Deduction for Stamp Duty and Registration Charges (u/s 80C):A deduction for stamp duty and registration charges paid on the purchase of house property can also be claimed u/s 80C but within the overall limit of Rs. 1,50,000. It can be claimed only in the year in which these expenses are incurred.

3. Deduction of interest on Home loan: As per Sec 24, maximum deduction for Interest payable on Loan is Rs. 2,00,000 where the loan has been taken on or after 01-04-1999 for the Purchase or Construction of a self-occupied Property and the property has been acquired or constructed within 5 years from the year in which loan was taken. The maximum tax deduction allowed u/s 24 of interest on loan on a self-occupied property is Rs. 30,000 where the loan was taken before 01-04-1999 or the loan was taken for repair, renewal or reconstruction. There is No maximum limit in case the house property for which the Home Loan has been taken is not self-occupied and the taxpayer can take deduction of the whole interest amount.

4. Additional deduction of interest u/s 80EEA:Additional deduction of interest on home loan taken from any financial institution, is available to individuals up to a maximum limit of Rs. 1,50,000provided the following conditions are satisfied:

  • The stamp value of the property does not exceed Rs. 45 lacs.
  • The loan must have been sanctioned between 1st April 2019 to 31st March 2021.
  • On the date of sanction of loan, the individual does not own any other residential house property.

5. Additional deduction of interest u/s 80EE: Additional deduction of interest on home loan taken from any financial institution, is available to individuals up to amaximum limit of Rs. 50,000 provided the following conditions are satisfied:

  • The value of residential house property does not exceed fifty lakh rupees.
  • The loan must have been sanctioned between 1st April 2016 to 31st March 2017.
  • The amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees.

On the date of sanction of loan, the individual does not own any other residential house property.

Summary

Section Nature Maximum Deduction Conditions
24 Interest Rs. 2,00,000 Construction must be completed within 5 years from the end of FY in which loan was taken.
80C Principal Rs. 1,50,000 Property should not be sold within 5 years of possession.
80C Stamp Duty Rs. 1,50,000 Claim is allowed in the year of expense incurred.
80EE Interest Rs. 50,000 Property Value should not exceed Rs. 50 lakhs and the loan amount should not exceed Rs. 35 lakhs.
80EEA Interest Rs. 1,50,000 Stamp value of property should not exceed Rs. 45 lakhs and deduction u/s 80EE must not be claimed.

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