6 Simple Ways to Avail Tax Benefits on Home Loans in India

A Home loan is an easy way to get the money you need to buy your dream home. By enticing residents to invest in real estate, the Indian government provides a home loan tax benefit for the people. This encouraged residents to invest in real estate under the Income Tax Act of 1961.

These benefits help you better manage your financial flow while having the lowest home loan interest rate. Understanding all home loan tax benefits is essential since doing so might enable you to reduce your tax obligations significantly.

Principal and interest payments are integral parts of a mortgage. Both pieces are eligible for tax deductions. Interest payments could be deducted under Section 24(b) of the Income Tax Act of 1961, while the principal repayment could be deductible under Section 80C


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Here are some ways to avail tax benefits on home loans in India

  1. Tax Benefits under Section 80 C – Repayment of Principal Amount:

You may deduct up to Rs. 1,50,000 principal payments from your taxable income each year under this section. Both privately owned homes and rented houses fall under this.

  • If you sell your house within five years of possession, you will not be eligible for this deduction.
  • If you sell your house within five years of receiving ownership, all claimed deductions will be reversed in the year of the sale.
  • It also includes any registration costs and stamp duty.
  1. Tax Benefits under Section 24 – Payment of Interest:

Below are the Home loan tax benefits under Section 24:

  • If you own more than one property, your overall tax deduction for loan interest can be at most Rs. 2 lakhs in a fiscal year.
  • The interest you can deduct has no upper limit if the property is on rent. The interest paid on your house loan for building, repair, renewal, acquisition, or reconstruction can be written off as tax deductible if you have rented out your property.
  • Section 24(b) of the Income Tax Act allows you to deduct interest paid on your house loan. The maximum tax deduction of Rs. 2 lakhs for a self-occupied residence can be claimed from your gross income each year
  1. Tax Deduction on Interest Paid for Under-Construction Property:

You can save money on your housing loan after the construction is finished if you have purchased a house, it is still being built, and you are making monthly EMI payments.

  • Interest during pre- and post-construction periods could be written off under the Income Tax Act of 1961.
  • The total deduction for interest that a taxpayer could claim under Section 24(b) is equal to 1/5 of the interest related to the pre-construction period (if any) plus the interest associated with the post-construction period (if any).
  1. Tax Benefits under Section 80EE – Additional Deduction:

If you are a first-time buyer you could be eligible for tax benefits under Section 80EE in these ways:

  • The deduction would be possible only if the property were purchased for less than Rs. Fifty lakhs, and the loan amount was up to Rs. 35 lakhs.
  • You can benefit from this deduction if you pay the loans.
  • The deduction would be available starting with the 2016–17 fiscal year.
  1. Tax Benefits under Section 80 EEA – Interest on Home Loan (First Time Buyers):

These conditions of Section 80 EEA home loan tax benefit must be fulfilled for you to be eligible:

  • A housing loan from a financial institution is a must or a housing financing firm if you wish to purchase a residential home.
  • An Individual taxpayer cannot use the current Section 80EE to deduct expenses.
  1. Tax Benefits for Second Home Loan:

If you take out a loan to buy a second home, you’ll be qualified for the following tax breaks:

  • The existing regulations state that the tax advantages are possible on due interest. All the interest amounts paid can be deducted under the Income Tax Act of 1961.
  • In 2019 the government increased the incentives for buying real estate. Earlier, one house property was said to be self-occupied, and more than one property was assumed to be on rent, which later gets taxed as a rental income

These six ways will surely help you to get tax benefits and the lowest home loan interest rate. With just a little knowledge, anyone can avoid paying hefty and sometimes unnecessary taxes.


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