Home Loan Tax Benefits- What are the Income Tax Benefits?

According to the provisions of the Income Tax Act, a home loan can help you save tax. Under the Income Tax Act of 1961, the government provides various tax benefits on home loans. Tax deductions are available under both of these categories under Sections 80C and 24(b) of the Income Tax Act. Take a look at all the tax benefits available on home loans.

Tax deduction on home loan

Principal repayment

Section 80(c) of the Income Tax Act allows for a tax deduction of up to Rs 1.5 lakh on the principal repayment portion of the EMI per fiscal year. This deduction is only available after the residential house property has been completed. However, in order to claim such a deduction, you must sell your property within 5 years of the end of the fiscal year in which possession is obtained, or the benefit will be reversed.

Stamp duty and registration charges

Stamp duty and registration fees can also be claimed as tax deductions under section 80(c) of the Income Tax Act, but only up to Rs 1.5 lakh in total principal repayment. It can, however, only be claimed in the year in which the expenses were incurred.

Interest paid on home loan

The interest paid on your home loan can be deducted under Section 24(b) of the Income Tax Act. A maximum tax deduction of Rs. 2 lakh per year can be claimed from your gross income for a self-occupied house if the construction/acquisition is completed within 5 years. There is no cap on the amount of interest that can be claimed on rented property. The total loss that can be claimed under the heading 'House Property', on the other hand, is limited to Rs 2 lakh. This deduction is available beginning in the year the house is finished.

Interest paid for under construction property

You are paying the EMIs if you purchased an under-construction property. In this case, your eligibility to deduct interest on a home loan begins only after construction is completed, or immediately if you purchase a fully constructed property. The Income Tax Act allows for the deduction of both pre-construction and post-construction period interest. Interest on pre-construction loans is deductible in five equal annual instalments beginning with the year the house property is acquired or constructed.

Joint home loan

If you take out a home loan jointly, each borrower can claim a deduction for home loan interest up to Rs 2 lakh under Section 24(b), and principal repayments up to Rs 1.5 lakh under Section 80C. They must also be co-owners of the property lent to be eligible for this deduction. As a result, borrowing with your family may allow you to claim a larger tax benefit.