Home Loans Tax Benefits: How to Avail Them?

The government has introduced many benefits to home buyers to ensure that the dream of homeownership is accessible to as many citizens as possible. One of the most significant benefits of owning a home is the tax benefits that come along with it.

You can avail of tax benefits by several wise investments done over the years. Among them, tax benefits on home loans are a long-term investment that will give you tax exemption for a more extended period. Home loan passes the eligibility for tax deduction under Section 80C. If you are willing to buy your dream house, home loans come with multiple perks in housing loan tax benefits.

To learn more about income tax benefits on home loans and how to avail of it, keep reading this article.

Everything About Home Loan Tax Benefits

First, to understand the income tax benefit on home loans, let us understand the home loans process.

What is a Home Loan?

A home loan provides a large amount of financial help provided by lenders that aids in buying your dream house. Lenders can pay between 75-90% of the cost of the home you bought, depending on your loan eligibility and funding norms.

To know about the eligibility for home loans, you can use the home loan eligibility calculator. After you have made the initial down payment, lenders will disburse the loan amount in parts or full, depending upon the stage of construction of the property. In case of part disbursal of loan, the financial institution will only charge interest on the amount disbursed. While in case of fully disbursed loan, EMI will commence. EMI comprises the repayment of principal and interest component.

Tax Benefits on Home Loan

In 2020-21, the Union Minister of India announced that all old regimes of income tax rebates on home loans are applicable till the year 2024. The following are the housing loan benefits:

Deduction on Repayment on Principal Amount

By now, you must be well-versed with the two components of EMI, i.e., principal amount and interest amount. According to section 80C of the Income Tax Act 1961, you can avail Tax Exemption on Home Loan on the amount you repaid if the property is self-occupied.

In case of a second home bought with the help of a home loan and occupied by self or rented out, you can still get housing loan tax benefit up to Rs 1.5 lakh. You can even avail of tax benefits on stamp duty and registration fees, but only once.

Must Read: What is Down Payment for a Home Loan?

Deduction on Payment of Interest Amount

Under section 24 of the Income Tax Act, you are eligible for the home loan interest deduction section. For self-occupied property, you can claim home loan tax exemption on the interest amount up to Rs 2 lakh. If you have another property, then the total tax deduction for both homes should be up to Rs 2 lakh.

Deduction on Home Loan Interest Rates in the Pre-construction Phase

According to section 24b, you can avail of home loan interest tax benefit on the interest paid in the pre-construction phase. If you applied for a home loan while your property is in construction and had produced interest rates during this phase, you could avail yourself of a deduction on these interest amounts in five equal installments.

Deduction in a Joint Home Loan

If you have applied for home loans jointly with your partner, you both can enjoy tax deduction benefits on the principal amount up to Rs 1.5 lakh each (section 80C) and on interest amount up to Rs 2 lakh each.

Additional Housing Loan Tax Benefit

Under section 80 EE, if you have taken a housing loan in the year 2016-17 of Rs 35 lakhs or less and the actual cost of the home is up to Rs 50 lakhs, then you are eligible for an additional deduction of Rs 50000 along with Rs 2 lakh deduction.

Deduction on an Affordable House

According to section 80EEA, you must satisfy the following conditions to avail of an extra deduction of Rs 1.5 lakhs.

• The stamp value should not exceed Rs 45 lakhs
• Home loan applied between 2019 and 2020
• The buyer should be the first holder of the property

How to Avail Income Tax Benefits on  Home Loan?

After studying the income tax benefits on home loans mentioned above, you should confirm the following things to avail of tax benefits.

• Registration of the property should be in your name.
• The construction of the property should be complete.
• Submission of home loan documents required.
• Certificate from the bank or financial institution with the break-up of the  principal and interest paid during the year. 
• TDS of the agreement value should be adjusted 
• Knowledge of deduction amount for tax benefit. You can calculate this amount by using an online home loan EMI calculator.

Must Read: How to Reduce Your Home Loan Interest Burden (4 Simple Tips)

Final Words

Income tax rebates on a home loan can result in a lot of savings for potential home buyers and lessen their burden when it comes to paying off the cost of their home loan. Given the grand scope of house loan tax exemption as mentioned above, purchasing a new home even from an investment standpoint sounds like a very beneficial idea.

At PNB Housing, you can explore the best home loan for your need at competitive interest rates starting at 8.50%. Visit the website to take the first step towards your dream goal.

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