Learn About All The Tax Benefits On A Housing Loan


To boost demand in the housing finance sector, the Government of India (GOI) has initiated a vast range of benefits. As scores of Indians avail home loans to finance their preferred residential property, they can utilize these advantages. Besides, a number of home loan tax benefits enable individuals to further reduce their financial burden while servicing their home loans.

As a result, borrowers have been quick to realize the economic benefits of taking housing credit. With instances of tax exemption on the repayment amount, individuals can significantly expand their savings corpus by an attractive margin. Therefore, it becomes necessary to gather concrete knowledge of tax benefits on home loan and their financial implications.

What are the Tax Benefits on Housing Loan?

The GOI has the authority to extend home loan tax benefits to individuals under Section 80C and Section 24(b) of its Income Tax Act, 1961. These sections apply to both your principal and interest components of home loans. By leveraging these tax benefit provisions effectively, a person can thus substantially reduce his/her total EMI paid towards a loan repayment procedure.

Besides, it becomes essential to learn about the exact figures of tax exemption under these sections of the IT Act, 1961. This enables individuals to formulate an efficient financial plan for themselves. Therefore, the tax exemptions that individuals are eligible to avail include the following –

  • Section 80C of the Income Tax Act, 1961 – By means of this provision, individuals can claim deductions up to Rs.1.5 lakh on an annual basis. However, they should know that this deduction is only applicable to the principal amount of their home loans. Additionally, this category of home loan tax benefit is valid for individuals who are either self-occupants or owners of let-out real estate properties.However, a person has to keep in mind that it is only applicable to constructed residential properties. Besides, individuals cannot claim this benefit if they decide to sell off their property within 5 years from possession. They can further save under this provision by claiming the expenses associated with stamp duties and registration fees of the property.
  • Section 24(b) of the Income Tax Act, 1961 – This provision of the IT Act allows individuals to claim up to Rs.2 lakh on the interest component of the housing loan. This specific tax benefit functions on an accrual basis, which means that individuals will still get the benefits if no payment is made towards the interest. Therefore, this financial reward projects itself irrespective of the home loan rates of interest.However, only the individuals who have completed the construction of their residential property within the first 5 years are eligible to get the upper cap of the benefit. Else, people who self-occupy residential properties, which have not been completed within this period can claim only up to Rs.30,000. Additionally, there is no specific direction or instruction on the sale of the residential property in question. This suggests that individuals can take decisions regarding the sale of the property at any point in time.

Moreover, one of the benefits that first time home buyers can experience comes under Section 80EE of the same legislation. As per this section, individuals who have opted for a home loan can get additional exemption of Rs.50,000 on the interest payable. However, the worth of the residential property must be below Rs.50 lakh, and the home loan amount should be a maximum of Rs.35 lakh.

Thus, individuals should use a home loan tax benefit calculator to gather accurate information on tax exemptions in financial terms. With the information that this effective tool provides, they can plan how to preserve or channelize their savings corpus.

What is the process to claim tax benefits on a home loan?

Individuals who are servicing their home loan can claim home loan tax benefits by considering the following steps –

  • Gather information about the exact exemption amount using the home loan tax benefit calculator.
  • Provide your employer with the home loan interest certificate and request them to alter the Tax Deductible at Source (TDS) accordingly.
  • You can also file the tax return by yourself if you are a self-employed individual.

Furthermore, individuals can save significantly on home loans up to Rs.3.5 crore by means of an affordable rate of interest. They can even customize their home loan tenor to choose the most convenient mode of repayment.

They can also benefit from pre-approved offers that reputed financial institutions provide on secured financial products such as home loans and loan against property. With these offers, they can significantly cut down the time and effort required for a successful approval process. You can check your pre-approved offer simply by providing your name and basic contact details.

Therefore, the wide range of home loan tax benefits is a viable option to reduce one’s financial obligations related to the repayment procedure. These are some things that one should know about saving tax when he/she takes a home loan.

Similar Read: Know The Tax Benefits On a Joint Home Loan