Tax Benefits on Your Home Loan

Owning a home is a dream to many of us, and the home loans are the one helping us to make our dream come true. Though many of us have a home loan or some may be planning to have now, but everyone is not completely aware of the tax benefits which can be availed on a home loan.

Do you Know you Can save up to 7 Lakhs Tax on your Home Loan?

There are several tax benefits which can be availed on a home loan. Most of us are aware of the tax benefit of ₹ 1.5 lakh under section 80C, but you need to know much more about it.

A Home loan includes two parts 

1. Principal Amount

2. Interest charged

The principal repayment amount is the amount which we have borrowed as a home loan from any Bank or NBFC. Whereas the interest is the amount charged by the lender as their profit percentage against their lending.

The Tax Debatable is both on the Principal and interest separately. Let us understand it in detail.

Interest                       +               Principal Repayment

      |                                                            |

₹ 2 lakhs                                         ₹ 1.5 lakhs

Under section 24                      Under section 80C

Under Section 24 

Under Section 24 one can Avail a Tax Benefit up to 2 lakhs on the Interest Paid.

The Terms and Condition to avail this Benefit :

  • You can avail this only for the purchase or construction of a new home.
  • When used for renovation the tax debitable amount reduces to ₹ 30,000.
  • This benefit can only be claimed when you get possession of your house/flat or when the construction work gets over.
  • Under the construction period, no tax deduction can be availed.
  • But the interest paid during the construction period can be calculated and tax deduction can be availed on that for the next 5 years (dividing the total amount in 5 equal proportion) when the construction work is over.  
  • If you don’t get the possession in 5 years from which you avail the loan, in that case, you can avail tax benefits only for ₹30,000.
  • The last and the most important factor is, you need to avail your home loan only for an authorized/ national or private sector bank.

Under Section 80 C 

Tax Benefit of 1.5 Lakhs can be availed under section 80C for a home loan.

Terms & Condition

  • If you sell your property for which you availed the home loan under 5 years, then you can’t avail this benefit. Moreover, this will be included in your income and you need to pay tax for that.
  • Under section 80C one can also avail tax benefits on the stamp duty charges. But, this can only be availed in the financial year when you purchased the property and paid the stamp duty charge.

Under Section 80 EE

One can get a Tax Benefit of ₹50, 000 under Section 80 EE

Terms & Condition to Avail this Benefits –

  • This can be availed only when you purchase your first home.
  • There should be no more property/home registered on the name of the borrower.
  • Your loan should be only from any authorized body such as any public or private sector bank.
  • Your home loan amount should not be more than ₹35 lakhs.
  • The cost of your property/house should not be more than ₹50 lakhs.

Tax Benefit on Top-up Home Loans

One can avail tax deduction on top-up home loans as well, but it can only be availed when the amount borrowed is used for the repair, renovation or for some addition construction of the home. Here, the amount of debetable is only ₹30,000.  

Do you know you can avail still more?

Ya! You heard it right, you can avail tax benefit up to ₹7 lakhs on your home loan. 

How to avail this?

By having a co-owner for your property and a joint home loan with the same person makes you eligible to avail more tax benefits on your home loan.

Suppose you purchase a property on a joint name of you and your wife.

You availed a home loan with your wife as a co-borrower to purchase this property.  Doing this increases your eligibility to avail the loan and you can even get qualified for a home loan of more amount.

Moreover, you both can avail the tax benefits separately,

Both can avail a tax benefit of 1.5 lakh under 80 C as well as both can avail the tax benefit under section 24 which is for 2 lakhs. Tax benefit under 80 EE for ₹50,000 can also be availed.

All this can be availed separately by both the borrower and co-borrower as well.

So, in the combined form you can avail much more benefit than availing it as an individual.