Home Loan Tax Benefits

For individuals, proudly owning a house is a dream comes true. The Indian authorities have usually proven a robust choice to inspire people to own personal space. This is why a house loan is tax-deductible beneath segment 80C. And while one purchases belongings with a home loan, one gets a slew of tax breaks that reduce their tax invoice dramatically.

Many programmes, which include the “Pradhan Mantri Jan Dhan Yojana”, are shining a vibrant light on the Indian housing marketplace by trying to deal with issues of price performance and accessibility.


Current Status of Home Loan Tax

The government extended the extra tax deduction of 1.5 lakh on interest paid on housing loans for the acquisition of affordable dwellings by one year in Union Budget 2021 on February 1, 2021. Borrowers can now take advantage of a reduction of up to Rs. 3.5 Lakh for one extra loan until March 31, 2022.

Such reduction is provided under Section 80EEA, which allows for income tax deductions of up to Rs. 1.5 lakh on house loan interest payments. These home loan tax benefits are in addition to the current Section 24 (b) exemption of Rs. 2 Lakh.

Such housing loan tax breaks are only available for homes with a stamped value of up to Rs. 45 lakh. Homeowners can receive the benefits on loans taken out until March 31, 2022. Borrowers would be eligible to claim a maximum income tax deduction of Rs. 7 Lakh as a result. Those who take up house loans under the PMAY CLSS plan are eligible for income tax breaks under Section 80EEA.

Deduction for Housing Loan Interest

A house loan has to be received for the acquisition or construction of a residence, and the residence has to be completed within five years of the end of the monetary year wherein the mortgage was received.

If one pays an EMI for a house mortgage, it accommodates the following components:

  • Remittance of interest
  • Repayment of principle

Section 24 permits to deduct the interest, forming a part of EMI bills for the year as much as Rs 2 lakh out of your general income.

From the appraisal Year 2018-19 onwards, the most deduction for interest paid on Self-Occupied House Property is Rs 2 Lakh. There isn’t any higher restriction for claiming interest on rented property.

Nonetheless, the full loss that could be claimed beneath the heading of House Property has been confined to Rs 2 lakh. This deduction is to be had to start with the year wherein the residence is constructed.

Interest paid on a house loan during the pre-construction phase is deductible

Let’s say one bought property while it is under construction but haven’t moved in yet. However, one pays the EMIs. In such a situation, one’s ability to deduct interest on a home loan does not begin until the construction is complete, or quickly if one purchase a fully built property.

The income tax law allows one to deduct this interest, known as pre-construction interest, in five equal instalments from the year of purchase of the property or of completion of construction, in addition, the deduction one is otherwise entitled to claim, gives one their home income. However, the maximum amount allowed remains at Rs 2 lakh.

Principal Repayment Deduction

Section 80C allows a deduction for the main component of the EMI paid for the year. The total amount that can be requested is Rs 1.5 lakh.

However, to benefit from this deduction, the residence does not have to be sold within 5 years of occupancy. Otherwise, the previous deduction will be applied to the income for the year of sale.

Deduction for Stamp Duty and Registration Fees

Aside from the deduction for principal repayment, a deduction for stamp duty and registration expenses can also be claimed under section 80C, but only up to Rs 1.5 lakhs in total.

However, it may only be claimed in the year in which the expenditures are spent.

Section 80EE provides for an additional deduction

Homebuyers are entitled to an additional deduction of up to Rs 50,000 under Section 80EE. To claim this deduction, one must meet the conditions listed below-

  • The loan amount must be Rs 35 lakh or less, and the property value must not exceed Rs 50 lakh.
  • The loan may have been approved between April 1, 2016, and March 31, 2017.
  • And, on the loan approval date, the individual has not used any other home, indicating that he is the first buyer of a house.

Section 80EE was reinstated in the fiscal year 2016-17. Previously, the deduction allowed under Section 80EE was only available for two years, fiscal 2013-14 and fiscal 2014-15.

Section 80EEA provides for an additional deduction

The budget for 2019 includes an extra deduction under Section 80EEA for homeowners of up to Rs 1,50,000.

The following requirements must be completed to claim this deduction:

  • The value of the stamp of the property does not exceed 45 lakh rupees.
  • It is a must that the loan should be approved between April 1, 2019, and March 31, 2020.
  • The individual has no other residence at the time of loan approval, indicating that he is a first-time buyer.
  • If the individual claims the deduction under this section, he should not be allowed to also claim the deduction under section 80EE.

Tax Deductions on a Joint Home Loan

On the occasion of a shared residence loan, every borrower can advantage from tax blessings at the joint domestic mortgage from his or her taxable profits separately. Approximately an amount of Rs. 2 lakh may be claimed on interest paid and as much as Rs. 1. 5 lakh on principal. One’s own circle of relatives members, friends, or maybe partner could be a co-borrower on Joint Home Loan.

The sole requirement is that every applicant for a housing mortgage is a co-proprietor of the residential property.

Home Loan Tax Benefit on a Second House

If you take out a second home loan to buy another property, you’ll get tax relief on the interest you pay. Since there is no limit here, you can collect the full amount of interest paid.

Individuals can now only claim one house as self-contained property and pay taxes on the other on the basis of the imputed rent. to help borrowers save more money in taxes.

How to Claim a Tax Break on a Home Loan?

The procedure for claiming tax advantages on a house loan is straightforward.

  • Confirm that the real estate is registered in your name. If you have a combined home loan, make sure you are a co-owner of the house.
  • Determine the total amount you may deduct as a tax deduction.
  • Hand over the home loan interest certificate to your employer so that he can amend the TDS.
  • If you do not complete this step, you must file your IT returns.

Self-employed borrowers do not need to provide these papers. They must have these on hand in case a question arises in the future.


Housing loans are by far the most regularly obtained type of finance in India, helping millions of individuals to purchase their dream homes. Aside from the obvious aspects such as interest rate and duration, you should also keep an eye on tax deductions from your house loan instalments. It is determined by numerous criteria, including your age, taxable income, principal repayment and interest amount for the assessment year. Other elements might also come into play.

Individuals evaluating their taxes under the earlier regime, for example, are eligible for different tax refunds for house loan repayment than those assessing their taxes under the new regime.

Under the Income Tax Act of 1961, the Government of India provides tax incentives on house loans. Borrowers of house loans can benefit from tax deductions on principal repayment under Section 80C, interest deductions under Section 24 (b), and an extra home loan interest tax advantage for first-time homeowners under Section 80EE.

These home loan tax breaks enable borrowers to save a significant amount of money each year.


CA Rishabh Maheshwari is an associate Chartered Accountant having expertise in conducting statutory and internal audits of large clients. He has also done a certified course on Concurrent audits of banks. He is responsible for coordination, planning, team leadership in connection with Audits and GST of Private and Public Companies with an experience of almost 3 years.

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