Tax Benefits on Home Loan that You should Know
Jun 13, 2018 Legal Guidance
A home loan makes home buying easier. And to make home buying more attractive, the government provides several tax benefits on the home loan which are usually in the form of income tax deductions.
Home loan broadly has two components: repayment of principal amount and home loan interest payment. And different sections of the Income Tax (I-T) act 1961, rule the various components of home loan repayment that are claimed as tax deductions.
Here are some insights about the sections and deductions.
Home loan broadly has two components: repayment of principal amount and home loan interest payment. And different sections of the Income Tax (I-T) act 1961, rule the various components of home loan repayment that are claimed as tax deductions.
Here are some insights about the sections and deductions.
Tax benefit under Section 80C
The repayment of the principal amount gets covered under Section 80C of I-T Act. According to the act, maximum of Rs 1.5 lakh can be claimed. Under this section, the deduction can be also claimed on investments in the Equity-Oriented Mutual Funds, Senior Citizens Saving Scheme, National Savings Certificate, Public Provident Fund (PPF) Account, Tax Saving Fixed Deposits among others. Remember the amount paid as the stamp duty and registration fee is allowed for a tax deduction if the income tax payer has not taken the loan.
Some more facts about this act:
- Under section 80C, the tax deduction is available on the actual payment bases, irrespective of the fact in which year the payment has been made.
- The benefits under this section can be claimed only after the construction of the property has been completed and completion certificate is attained.
- For the period of time till which the property had been under construction, no deduction is allowed for the repayment of the principal amount.
- Under Section 80C (5) of the I-T Act, no tax deduction and the benefit is allowed, if the income tax payer transfers the property on which the tax deductions had been claimed within a period of five years.
Tax benefit under Section 24
The tax benefit on home loan payment of interest is acceptable as a deduction under Section 24 of the act. As per the section, interest paid on the home loan gets deducted from the income of the house property wherein the loan is taken for the purpose of repair, reconstruction, purchase or construction of a residential property. Under this section, for a self occupied home the limit has been restricted to Rs 2 lakh. However, there is no maximum limit for a home loan taken for a property that hasn’t been self occupied. In such situation, the tax deduction on the whole interest amount can be availed under this section. The tax payer can claim the deduction even if there is no actual payment has been made under this section.
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