How Does Having A Home Loan Save You Income Tax?

By | November 21, 2021

Buying a shelter of his/her own is a dream of every citizen. For which, the Indian Government has shown the inclination to provide for in all the ways possible. India is a place where not only can you get the home loan to get a house of your own, but get several tax benefits to leverage even more ease and advantages from the loan, that up to some extent reduces the loan outgo. 

According to the provision of the Income Tax Act, 1961, taking a home loan can help you save income tax. Besides, after the announcement made by Nirmala Sitharaman, the Union Finance Minister, in the budget speech adds a topping to the benefits you can enjoy by taking the home loan. 

When buying a home seems to be an expensive affair – you must know you can get benefits even on the housing loan. To learn about the advantages you can avail, and how you must do that, read the complete write-up.  

In this read, we will discuss how having a home loan saves you income tax in brief. 

Income Tax Benefits Of Home Loan You Can Enjoy

The tax benefits you can enjoy, according to the sections mentioned below are incredible. 

  • 80C – Rs. 1.5 Lakhs
  • 24 (b) – Rs. 2 Lakhs Per Annum
  • 80EE – Rs. 50,000
  • 80EEA – Rs. 1.5 Lakh

Learn What’s There Under Sections 80C, 24(b), 80 EE, and 80EEA

Tax Benefit of Section 80C – Principal Deductions – 

  • The principal amount paid of the EMI for the year is allowed for the deduction under section 80C. If you have a self-occupied or let-out property, you can claim the maximum amount of Rs. 1.5 Lakhs. 
  • To claim the deduction, the construction of the property must be completed. 
  • If you wish to claim the deduction you are not allowed to sell the property. You must have at least five years of property possession. 
  • The stamp and registration charges are included in the limit of Rs. 1.5 Lakhs. You can claim this deduction only once. 
  • However, if after taking the deduction, you sell out your property within five years, the amount will be reversed. And the amount will be added to your income for the sale year. 

  Benefit Under 24(b) – EMI Amount – 

  • To claim the deduction under Section 24(b), the loan should be taken for the construction, or the purchase, of the house. And if you are taking it for the construction, it must get completed within five financial years of the loan taken. 
  • Now, when you pay EMIs for the home loan, it is always paid back in two segments – principal repayment and interest payment. So, to claim the interest portion of the EMI for the entire year, you can claim the deduction of up to Rs. 2 lakhs from your total income under section 24(b). 

How Section 80EE Benefits You – 

Under section 80 EE, you can claim the deduction of the maximum amount of Rs. 50,000. To get this claim, you must be eligible for it. See what decides your eligibility for this loan. 

  • The loan sanction date must be between 1st April 2016 – to – 31st March 2017.
  • The loan amount should be Rs. 45 Lakhs or less. 
  • The value of the property should not be more than Rs. 50 Lakhs. 
  • To have this deduction, this loan must be for your first home. On the loan sanction date, you must not own any other house. 

  Advantages Section 80 EEA provides –

  • Under Section 80 EEA, a deduction for the interest of up to Rs. 1,50,000 can be availed by you. 
  • This deduction is available for over and above the Rs. 2 Lakh interest payment deduction under section 24. 
  • If you meet the conditions of section 80 EEA, you can claim the total amount of Rs. 3.5 lakhs in total. 
  • When you are claiming deduction under Section 80 EEA, you are not supposed to be claiming deduction under 80 EE. 
  • The home you are buying using this loan amount should be your first home. 

Deduction of Joint Loans

If you have lifted the loan jointly, and two people are paying it back, both people are allowed to individually claim the deduction of Rs.1.5 lakhs each. 

The above mentioned, are all the benefits one can claim when you have the housing loan on your shoulders. This way, with your home loan, you can save enough on your income tax. 

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