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The Income Tax Act of 1961 has several sections that offer tax deductions related to home loans. These tax benefits can significantly ease the financial burden associated with owning a home.
Repayment of Principal Amount: Under Section 80C of the Income Tax Act, 1961, you can claim a deduction of up to ₹1.5 lakh annually on the principal repayment of your home loan. The deduction is available for repayment of the principal amount of the loan, as well as expenses such as stamp duty and registration fees incurred while buying the property.
Interest Paid on Housing Loan: Section 24 of the Income Tax Act allows you to claim a deduction of up to ₹2 lakh annually on the interest paid on your home loan for a self-occupied property. Any interest payments above ₹2 lakh during a fiscal year are not deductible in subsequent years.
Deduction on Buying an Affordable House: Under Section 80EEA, you can claim an additional deduction of up to ₹1.5 lakh annually on the interest paid on the home loan for an affordable house. This is in addition to the ₹2 lakh deduction under Section 24. However, if you qualify, you can claim a total deduction of up to ₹3.5 lakh per financial year.
To qualify for this deduction, the home loan must be sanctioned between April 1, 2019 and March 31, 2022, and the property’s stamp duty value cannot exceed ₹45 lakh. You should not own any other residential property and also not be eligible for a deduction under section 80EE.
This deduction is available until the loan is entirely returned, assuming the conditions are met.
The deduction was only available for loans sanctioned in fiscal year 2016-17 and is no longer eligible for new loans made after April 1, 2017.
Deduction Under Section 80EE: This is introduced to encourage first-time homebuyers and provides an additional deduction of up to ₹50,000 annually on the interest paid on a home loan.
To qualify for this deduction, the loan must be sanctioned between April 1, 2016, and March 31, 2017, while the property cannot be worth more than ₹50 lakh and the maximum loan amount is ₹35 lakh. Additionally, you must be a first-time home buyer and have no other residential properties.
To maximise tax savings, it is essential to understand these provisions and plan your home loan accordingly. By claiming these deductions, you can reduce your taxable income and save significantly on your tax outgo. Overall, home loans offer not only the opportunity to own a home but also significant tax savings.
