Repayment of housing loan is through Equated Monthly Installments (EMI) which consists of principal and interest component. As the repayment comprises of 2 different components, the tax benefit on home loan is governed by different sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.
The Sections under which Tax Benefit on Home Loan can be claimed are explained below:-
Page Contents
- Section 80C: Tax benefit on Principal amount on Home Loan
- Section 24: Income Tax Benefit on Interest on Home Loan
- Amendment in Budget 2017
- Home loan in Joint Names
- Section 80EE: Income Tax Benefit on Interest on Home Loan (First Time Buyers) – FY 2016-17 onwards
- Section 80EEA: Income Tax Benefit on Interest on Home Loan (First Time Buyers) – FY 2019-20 onwards
Section 80C: Tax benefit on Principal amount on Home Loan
The maximum tax deduction allowed under Section 80C is Rs. 1,50,000. This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made. The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan.
However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded.
Section 24: Income Tax Benefit on Interest on Home Loan
The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs. Moreover, if the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30,000 only. This limit of 3 years has been increased to 5 years from Financial Year 2016-17 and onwards.
In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.
It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Amendment in Budget 2017
In case of non-self occupied property, the interest paid is reduced from the Rent paid to arrive at the Income from House Property. In some cases, it may happen that the Interest paid is more than the Rent earned which will result in Loss from House Property. This Loss is allowed to be set-off with Income from any other head.
The Finance Act 2017 announced on 1st Feb 2017 has put a restriction to the maximum amount of Loss under head House Property that can be set-off from other heads of Income. From Financial Year 2017-18 onwards, Loss of a maximum of Rs. 2 Lakhs is allowed to be set-off with Income from other heads. The amount which is not set-off shall be carried forward to future years.
Let’ say Mr. A has house has a rental income of Rs 40,000 per month and he is paying home loan interest of Rs 10 lakhs p.a. He has income from remaining heads of Rs 12 Lakhs p.a.
Income from house property
| FY 2016-17 | FY 2017-18 | |
| Rental Income
(40,000*12) |
4,80,000 | 4,80,000 |
| Less : Municipal Taxes Paid | 10,000 | 10,000 |
| Less: Standard Deduction(30% * 4,70,000) | 1,41,000 | 1,41,000 |
| Less: Interest on House loan | 10,00,000 | 10,00,000 |
| Loss from house property eligible to be set off | (6,74,000) (no limit) | (2,00,000)
(maximum limit allowed ) |
Home loan in Joint Names
Tax benefits get divided among co-applicants in case of a joint loan. The division takes place in the same proportion in which the asset is owned by each co-applicant. Each co-applicant can claim a maximum tax rebate of up to Rs. 1.50 lakh for principal repayment (Section 80C) and Rs. 2 lakh for interest payment (Section 24). The very first condition is the house property has to be bought by the individuals jointly, and this should be in their joint names. The share of each holder should be clearly mentioned so that there is absolute clarity on the percentage ownership of each co-owner.
Section 80EE: Income Tax Benefit on Interest on Home Loan (First Time Buyers) – FY 2016-17 onwards
Maximum tax deduction allowed under Section 80EE is Rs. 50,000. This incentive would be over and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.
Conditions for availing deduction under section 80EE:-
1. Purchaser should be first time buyer i.e. he has never purchased any house and now he is going to purchase a house.
2. This deduction would be allowed only if the value of the property purchased is less than Rs. 50 Lakhs and the value of loan taken is less than Rs. 35 Lakhs.
3. The loan should be sanctioned between 1st April 2016 and 31st March 2017.
4. The benefit of this deduction would be available till the time the repayment of the loan continues.
5. This Deduction would be available from Financial Year 2016-17 onwards
Section 80EEA: Income Tax Benefit on Interest on Home Loan (First Time Buyers) – FY 2019-20 onwards
Maximum tax deduction allowed under Section 80EEA is Rs. 1,50,000. This incentive would be over and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.
Conditions for availing deduction under section 80EEA:-
1. Loan Sanctioned between 1.4.2019 to 31.3.2020 from financial institution /HFC
2. Stamp Duty Value of House Property (HP) not exceed Rs.45 Lakh
3. Not own any residential HP on the date of sanction of loan i.e. 1st time buyer
4. when deduction is allowed under Section 80EEA , not allowable in other section
5. Only to Individual (not for HUF, AOP etc)
6. Rs.1.50 Lakh is over and above Rs.2 Lakh u/s 24, hence total Rs. 3.50 Lakh
7. Carpet area of HP not exceed 60 sqmtr (645 sq ft) in metropolitan cities including Delhi NCR & carpet area not exceed 90 sqmtr (968 sq ft) in any other cities
8. if a person jointly owns HP with spouse and they both paying the installments of the loan, then both of them can claim this deduction
9. Section 80EEA Interest deduction is available from FY 2019-20 onwards (AY 2020-21)
Republished with amendments
The economics times of 31 Oct 2016 says that as per the verdict of Mumbai bench of income tax tribunal completions certificate is not mandatory to avail the rebate from house loan interest and principal paid. Can you please make a copy court resolution available for us.
I have taken personal loan of 10 Lakhs and purchased plot in my hometown. I’m paying monthly 21,000 towards EMI. Can I claim any income tax benefit for this under any section?
Please guide me.
sir
can i take home loan from relatives or other individuals ?
sir
i financed a flat from bank and i am a government servent flat is under construction can i take rebate under sec.24 of income tax
kindly advise
sarthak singh
Dear sir
Good evening,
I had taken a housing loan worth to Rs 20 Lakh.
The loan was sanction on February 09, 2016,
I want to whether I am also entitled to take benefits u/s 80EE or any other section?
please confirm.
Thanking you,
With warn regards
ALOK KUMAR SINHA
I brought house in FY16-17, even my loan was sanctioned during the same year. I’d also got the deduction u/s80EE during the year. Now shall i get the same deduction for FY17-18 as it is mentioned in the point number 3 and 4 of the conditions? or Will this deduction be applicable for the loan taken in FY17-18?
Hello Sir,
Could you please help me on the below query.
I have purchased a Residential Property (1st time Buyer) worth 30 Lakhs, Housing loan sanction: 27 Lakhs in June 2016. I have now let out the property.
Total Interest paid during the year is Rs. 2,30,000. Rent received for letting out is Rs 45,000 after standard deduction.
I want to now claim balance Interest of Rs. 45,000 under section 80 EE.
Whether I am eligible to claim u/s 80 EE as I have let out the property.
For the same home, the home loan and renovation loan of same, the interest of both home loan and renovation loan can be deducted in income tax under section 24(b)
That is interest of 80000/- on home loan and interest of 30000/- on renovation loan.
Total of 110000/- interest can be deducted in income tax.
We have one house in Joint name with wife self occupied against which home loan got diluted. I have booked an another under construction flat in Joint name with first name of wife(housewife) and living at working place away from home. Loan of 28.5 lakh is w.e.f Sep 2016 which is also in joint name but EMI paid by me from my salary income. Can I claim principal repayment & interest payment both regarding sanctioned home loan u/s 80c, 24 & 80EE of income tax act. Please guide me.
Pl. inform can my wife claim the same u/s 80c, 24 & 80EE of income tax act.
Thanks..
Dear Sir, If I am claiming ₹ 1,41,591.00 under Section24 and ₹ 85,116.00 under 80C than also can I avail extra ₹ 50k under 80EE if all the condition of 80EE I am fulfilling but I am not able to exhaust entire slab of 2lac under Section24 as the maximum intrest I am paying in the finincial year is ₹ 1,41,591.00 only. Do I need to exhaust entire ₹2 lac to claim exemption of ₹50k under 80EE?
My maximum amount I can claim in Section 24 is ₹ 1,41,591.00 that I did. Now Can i claim extra ₹50k in 80EE for sure ? What’s that Over and Above means.. little bit of confusion over there!
Please Help.
If I am claiming ₹ 1,41,591.00 under Section24 and ₹ 85,116.00 under 80C than also can I avail extra ₹ 50k under 80EE if all the condition of 80EE I am fulfilling but I am not able to exhaust entire slab of 2lac under Section24 as the maximum intrest I am paying in the finincial year is ₹ 1,41,591.00 only. Do I need to exhaust entire ₹2 lac to claim exemption of ₹50k under 80EE?
Hi Sir,
I have a self occupied flat and a let out flat. From FY 2017-18, will I be allowed to claim 2 Lakh benefit on self occupied and 2 Lakh benefit on let out i.e. a total of 4 Lakh?
Or Just 2 lakh across both my flats?
Sir, I have booked an underconstruction flat in the financial year 2015-16 n the loan of 25 lakh has been taken for the same purpose. In 2015-16 I have paid 15,70,000 and another 7,00,000 in the current financial year. The flat is still under construction. So how much tax benefit I ‘ll get in the current financial year? I have claimed 48,000 tax benefit in the previous financial year.
What is the meaning of “self-occupied” in Section 24.
Dear Sir,
We have one house in Joint name with wife. Loan is also in joint name but EMI paid by me from my salary income. One portion of house is given on rent and in another portion we lived.
Pl. inform can i claim total Interest amount u/s 24
and Rent income by my wife ?
Dear Tejinder ji,
Please share the relevant law for the below extract:
“The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan”
Sir Your article is very informative,but I think there is a mistake in your article i.e. you have given standard deduction from GAV not from NAV. I think that standard deduction should be given after the deduction of municipal tax (480000-10000= 470000, 30% of 470000).
I booked 3BHK flatt amt 36 lakh & loan sanctioned 32 lakh on1st July 16. EMI was 31500. Then I changed my Flatt at same location as corner Flatt at same amt & home loan sanctioned 34lakh in Jan 17. I got passion in Feb 17. Can I claim principal repayment & interest payment regarding boath sanctioned home loan u/s 80c, 24 & 80EE of income tax act. Please guide me.
Thanks.