Home Business 5 Home Loan Tax Exemptions

5 Home Loan Tax Exemptions

by Uneeb Khan
Home Loan

Purchasing an individual house of your own is a dream of many. The process may seem difficult, but with a home loan, it is easy to an extent. The government of India proposed various kinds of home loan tax benefits for individuals. The home loan tax exemptions will help you lower the tax payments. 

The tax deduction on home loans is inscribed in Section 80C and Section 24(1) of the IT Act, 1961. The home loan tax exemptions will not only assist you in reducing the tax returns but also in moderating the cash flow as well. Normally, people pay home loans through EMI, i.e., monthly payments. There exist two kinds of payments on which the tax benefits can be availed. These are a) Interest Payment and b) Principal Payment. 

Now, let us know about the various home loan benefits available under the Income Tax Act of 1961:

1) Deduction of tax for the Principal Payment:

This benefit can be availed from section 80C of the Income Tax Act, 1961. This benefit can be availed for two kinds of properties, that is, the own house and the rental house. This benefit includes tax benefits over stamp duty, registration fees, etc. 

However, to claim this particular exemption, the house should be constructed and should not be in the process of construction. Up to 1 lakh rupees can be claimed as an exemption.

For calculating the tax deduction, you can hire a professional or use a home loan tax exemption calculator. This will help you to make an informed decision before availing of the home loan. 

2) Exemption of tax by Section 24 of the IT Act, 1961:

This home loan tax benefit is available for interest payments. But, unlike principal payment, 2 lakh rupees of exemption will be availed if you availed a home loan for your own house. However, if you availed of a home loan for a rental property, there are no limits for claiming the interest. 

Again, if you had rented the property purchased under a home loan, then the interest paid on the home loan for repairing, constructing, renewing, etc., can be claimed for tax exemption. 

3)Tax exemption under 80EE of IT Act, 1961:

Section 80EE Income Tax Act, 1961, provides tax benefits for the interest paid on home loans. However, this exemption will only be availed for first-time buyers. Therefore, these conditions should be satisfied.  

  1. The exemption is only available if the purchased property is 50 lakh rupees and the home loan amount taken is 35 lakh rupees.
  2. The home loan should be sanctioned between the period of 1st April 2016 to 31st March 2017. 
  3. This home loan tax benefit is only available until and unless the loan payment is complete. 
  4. The tax exemption can only be availed from the financial year of 2016 to 2017 and later on. 

4) Section 80EEA of IT Act, 1961

The tax benefit is provided for first-time buyers and only for the interest paid on the home loans. You can avail of one and half lakh rupees of deduction additionally under section 80EEA income tax if you qualify the following conditions:

  1.  House loans should be taken from financial institutions only.
  2. The home loan approval must be given between 1st April 2019 to 31st March 2022. 
  3. The stamp duty should be at most 45 lakh rupees.
  4. The taxpayers should not be eligible under the exemption provided in Section 80EE of the Income Tax Act, 1961. 
  5. The home loan seeker should not have any previous residential property. 
  6. Finally, whether you are a resident of that house or not a resident of the house, you can claim this home loan tax benefit.

**Note: You can easily calculate your net tax exemption amount on a home loan by simply using a home loan tax exemption calculator.

5) Home loan tax benefits for second home loans:

The scenarios mentioned above are related to the first home loan; now let us know about the tax benefits available for the second housing loan. The amount of interest paid on the housing loan can be availed under this exemption. After the 2019 budget session, the second property is also treated as self–occupied and can avail of the home loan tax benefits accordingly. 

The home loan tax benefits can be calculated through a tax calculator online. All you need to provide is some details which include availed home loan amount, tenure of the home loan, interest rate, starting date of the home loan, annual income, and the tax deduction.

These are the best home loan tax exemptions for people with a home loan. There are various online home loan-providing companies, such as NAVI. These are the best online home loan-providing companies. With simple steps, you can get a home loan and avail of the tax benefits accordingly. 

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