• Fri. Oct 22nd, 2021

Everything You Need to Know About Income Tax Benefits on Home Loans


Everyone reaches peak adulthood when they buy their first house. Whether it’s your first vehicle, apartment or house, investments play a huge role in our lives. Luckily for us, the Indian government has always encouraged its citizens to invest in houses. When you buy a house using home loans, you are eligible for many home loan tax benefits. So, to better prepare yourself for your big investments, let’s go through the number of things you can use to your advantage when it comes to an income tax rebate on home loans.


According to the Income Tax Act of 1961, taking out a home loan can help you save on tax. Naturally, buying a home is a huge financial ordeal but with home loan principal tax benefits, this can be much easier. 

 Here are some of the updates on the tax benefits for the financial year 2021-2022.

  1. According to section 24, the maximum deductible amount on home loans is Rs.2 lakh p.a.
  2. According to section 80C, the maximum deductible amount on home loans is Rs.1.5 lakh p.a.
  3. According to section 80EE, the maximum deductible amount on home loans is Rs.50,000 p.a.

Important Updates on the Union Budget for 2021-2022

Updates on the Union Budget
Updates on the Union Budget

According to Finance Minister Nirmala Sitharaman, 
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  1. The eligibility period for claiming the additional deduction for the interest of rupees 1.5 lakhs paid for a loan taken for the purchase of an affordable house is extended to the 31st of March 2022.
  2. The eligibility period for claiming the tax holiday for an affordable housing project is also extended by another year and the new deadline is 31st March 2022.
  3. There is a new home loan tax exemption proposed for the affordable rental housing project in order to promote the supply of affordable rental housing for migrant workers during the current time.

Let’s Explore the Tax Rebate on a Home Loan that you Can Avail of Under Section 80C:

  1.  For self-occupied and also let out properties you are allowed to claim up to a maximum of 1.5 lakhs every year from a taxable income on principal repayment.
  2. You can claim this only once, and the stamp duty and registration charges may be included within it.
  3. It is important to remember that in order to claim the benefits under section 80C you first need to complete the construction of the property in question.
  4. You are not allowed to sell your house within the first five years after claiming this deduction.
  5. Note that if you sell your house within the first five years after claiming the deduction, it will be reversed in the year which you sell it and the amount will also be added to your income in the year of selling.

Tax Savings on Home Loans you Can Avail of Under Section 80EE

  1. On your interest payments, a proposal has been made to increase the income tax benefits by rupees 1.5 Lakhs.
  2. Under section 80EE, the upper limit for tax deductions is Rs. 3.5 lakhs.
  3.  You can avail of these benefits over and above the existing exemption of Rs. 2 lakhs under section 24(b).

The property value needs to be less than Rs.45 lakhs.
Read: How To Calculate the Principal Amount of a Home Loan?

Tax Savings on Home Loans
Tax Savings on Home Loans

To claim the home loan interest tax benefit under section 80EE, one must make sure that the following terms and conditions are met.

  1. These home loan tax deduction on income tax can only be claimed on the first house that is purchased by the taxpayer.
  2. These deductions can only be claimed if the value of the house does not exceed rupees 50,00,000.
  3. The deduction is not going to be available to claim if the home loan taken exceeds Rs.35,00,000.
  4. This home loan interest tax exemption is available to claim on the interest portion of the home loan
  5. The home loan must be sanctioned by a recognized financial institution like a bank or a housing finance company.
  6. The individual using this deduction, cannot own another house at the same time. 
  7. This deduction can only be used if the home loan is being used for residential properties, not commercial properties.

Check our more about Section 80EE from here.
Read: All You Need to Know about RBI’s EMI Moratorium

Joint Home Loan Interest Rebate in Income Tax

Joint Home Loan Interest Rebate in Income Tax
Joint Home Loan Interest Rebate in Income Tax
  1. If a home loan is taken by two people together, each of them is eligible to claim a deduction on the interest paid up to 2 lakh per person. 
  2. Tax is deducted on the principal amount as well as for an amount of up to Rs 1.5 lakhs each.
  3. Each applicant for the home loan has to be a co-owner of the property in order to claim this deduction.

Tax benefit on a second home loan or for a second property

  1. According to the current provision, the tax benefits are applicable only on the payable interest but you can claim the entire paid interest amount.
  2. According to the recent proposal, the second “self-occupied” home can be claimed so that borrowers save more on tax.

The Process of Claiming Tax Benefits on Home Loans

The Process of Claiming Tax Benefits on Home Loans
The Process of Claiming Tax Benefits on Home Loans
  1. Calculate the tax deduction that has to be claimed.
  2. Make sure the house is in your name or that you are a co-owner of the loan.
  3. Submit your home loan interest certificate to your boss in order to adjust the tax-deductible at the source.
  4. If you don’t want to submit your home loan interest certificate to your boss, you will need to file the tax return by yourself.
  5. If you are a self-employed individual, it is important to keep these documents ready or in a file, so as to avoid any issues later on.

Calculating Tax Benefits on your Home Loan 

You can easily calculate your tax benefits using an online calculator. In order to calculate your tax benefits, the details you will need are, the loan amount, tenure, interest rate, loan stare date, gross annual income and the existing deduction under section 80C/D

Big investments equal big decisions and lots of thinking and planning ahead, it may be difficult at first but with a little research and a whole lot of patience, you can have the house of your dreams in no time. If you’re still looking to buy a house or get a home loan, or even a home loan transfer, NoBroker can help! Click the link below to know more about NoBroker Home Loan Services. 

FAQs

Q1. Who is eligible for the home loan interest rebate in income tax?

Ans. The owner of the property is eligible for the tax benefits on home loans, if it is a couple taking a home loan, they are both eligible, individually for the benefits. In the case of a joint loan, the people taking the home loan need to be co-owners in order to qualify for the benefits.

Q2. What if I want to claim section 80EEA every year?

Ans. Taxpayers who are paying a housing loan can claim the tax deduction on interest payment of up to Rs 1,50,000 per annum under Section 80EEA.

Q3. How can I calculate the tax benefits on my home loan?

Ans. You can easily calculate your tax benefits using an online calculator. In order to calculate your tax benefits, the details you will need are, the loan amount, tenure, interest rate, loan stare date, gross annual income and the existing deduction under section 80C/D

Q4. What are the joint home loan tax benefits?

Ans. If a home loan is taken by two people together, each of them is eligible to claim a deduction on the interest paid up to 2 lakh per person. Tax is deducted on the principal amount as well as for an amount of up to Rs 1.5 lakhs each. Each applicant for the home loan has to be a co-owner of the property in order to claim this deduction.

Q5. What are some of the trustworthy banks that offer the home loan interest exemption in income tax?

Ans. ICICI Bank, Kotak Bank, Axis Bank, HDFC, SBI, Central Bank of India, HSBC, Bank of India are just some of the many trustworthy banks where you can get your home loan from.

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Kruthi

Kruthi is a Chartered Accountant has worked for various Real Estate firms across India, she is well versed with the legal and financial aspects of all real estate transactions. There are numerous documents and plenty of hidden fees that people get lost in, her goal is to shed some light on it all.

One thought on “Everything You Need to Know About Income Tax Benefits on Home Loans”
  1. Can I claim housing loan interest claim under loss of property upto 2 lakhs as per income tax guidelines as this is my second property and second house loan which is under construction yet.guide me accordingly

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