Written by : AK Agrawal

An experiences Chartered Accountant and Techno-Functional consultant working in industry for over 10 years dealing with multinational corporate clients. He is loves reading latest trend of technology trend.

Home Loan Tax Benefits

AK Agrawal
AK Agrawal, Chartered Accountant

Aug 3, 2021 14:16

Owning a house is a lifelong ambition for everyone since it provides both financial and mental comfort. The Indian government has traditionally favoured encouraging residents to own a home. It is why a house loan qualifies for a tax break under Section 80C. In addition, when you buy a property with a home loan, you get a slew of tax benefits that dramatically lower your tax bill. Many initiatives, such as the Pradhan Mantri Jan Dhan Yojana, illuminate the Indian housing industry by attempting to address concerns of availability and affordability.

In this section, we shall explore the home loan tax benefits offered to the house owners. In her budget address, Union Finance Minister Nirmala Sitharaman proposed that the government is extending the deadline for receiving extra deductions on house loan interest payments until March 31, 2022.

Tax benefits on Home loan ( 2021-2022 )

Income tax sectionsMaximum amount deductible
Section 24Rs. 2 lakh p.a
Section 80CRs. 1.5 lakh p.a
Section 80EERs. 50,000

The latest updates from Union Finance Minister Nirmala Sitharaman's latest budget, delivered on February 1 2021, are as follows:

  • The eligibility period for claiming an extra deduction for interest paid on loan acquired to buy a low-cost property has been extended until March 31, 2022.
  • The deadline for claiming a tax break for a low-income housing project has been prolonged by another year. The new deadline is set for March 31, 2022.
  • To encourage the availability of affordable rental housing for migrant workers, a new tax exemption is suggested. It deals with the notified Affordable Rental Housing Projects.

Deduction for interest paid on home loan

One must obtain a home loan for the purchase/construction of a house. The construction of such a house should end within five years from completing the fiscal year of the loan acquisition.

The EMI for home loan contains two components:

  • Interest payment
  • Principal repayment

Section 24 enables taxpayers to deduct the interest portion of their EMI payments for the year up to Rs 2 lakh from their total income. The maximum deduction for interest paid on self-occupied residential property is Rs 2 lakh from the assessment year 2018-19. There is no particular upper limit to claim the interest on rented property.

However, one can claim the total loss that under the heading of Income from House Property limited to Rs 2 lakh. This deduction is available beginning with the year in which the house gets built.

Deduction for interest charged on a home loan during the pre-construction period

Suppose you purchased an unfinished property and have yet to move in. Then, your eligibility to deduct interest on a home loan begins only when construction gets completed or instantaneously if you purchase a fully constructed property.

The income tax legislation allows you to deduct such interest, known as pre-construction interest, in five equal instalments from the year of the property purchase or the accomplishment of the construction activities. In addition to the deduction, you are normally allowed to claim from your home income derived. The maximum eligible amount, however, remains Rs 2 lakh.

Deduction for Stamp Duty and Registration Fees

Aside from the deduction for principal repayment, one can claim a deduction for stamp duty and registration expenses under section 80C. Yet, such deduction is available only up to Rs 1.5 lakhs. However, taxpayers may only claim these expenses in the year in which the expenditures are incurred.

Home loan tax benefits under section 80C- the principal deductions

  • You can lower the taxable income up to Rs.1.5 lakh on principal repayment for self-occupied properties and let-out properties each year.
  • It may include stamp duty and registration fees. But, one can file a claim for such costs only once.
  • To claim it, you must first finish the property's construction.
  • To be eligible for the 80 C deduction, you must not sell your home within 5 years after moving in.
  • If you sell your home within 5 years of possession, all deductions claimed will get reversed in the year you sell it. Include this sum in your income in the year of sales.

Tax benefits under section 80EE

  • A proposal was made to boost income tax benefits on interest charges by Rs.1.5 lakh.
  • One can claim deductions valuing up to Rs.3.5 lakh.
  • The advantage is in addition to the current exemption of Rs.2 lakh under Section 24. (b)
  • The property's worth must be less than Rs.45 lakh.
  • The loan amount should be Rs 35 lakhs or less, and the property value should not be more than Rs 50 lakhs.
  • The loan must have been sanctioned from April 1 2016, and March 31 2017.
  • And, as of the date of loan approval, the individual does not own any other homes, indicating that they are a first-time homebuyer.

Section 80EE has been reinstated with effect from the fiscal year 2016-17. Previously, the deduction permitted under Section 80EE was only available for two years, FY 2013-14 and FY 2014-15.

Deductions for Joint Home loans

The term "joint home loans" indicates that the loan is carried out jointly. As a result, if individuals together take a house loan, they can claim a deduction for the home loan. For this deduction, the interest is limited to Rs. 2 lakh and the principal repayment is limited to Rs. 1.5 lakh in their individual income tax filings. Individuals must also be co-owners of the property acquired on loan to claim this deduction. As a result, if you apply for a loan with your family, you will be able to claim a greater tax deduction.

Claim tax benefits on Home loan

  • Determine the tax deduction you can claim.
  • Confirm that the property is already in your name and that you're a co-borrower on loan.
  • Provide your home loan interest document to your employer to alter the tax-deductible at the source.
  • If you do not complete the preceding step, you will be required to file your tax return.
  • If you work for yourself, you are not obligated to submit these records anyplace. Simply keep them on hand in case the IT department has any questions in the future.

Find hassle-free home loans with tax benefits through the support of Gotaxfile

GoTaxfile is a digital accounting company providing competent finance, tax, and accounting services. Something essential that distinguishes us is that we believe in openness. Our team aims to undertake things correctly with the proper set of skills!

We are not simply dealing with statistics; our passion is to use smart technology to improve and expedite the process, empowering entrepreneurs by focusing on their company goals while giving them the assistance they require.

Using Gotaxfile's income tax calculator, you can quickly calculate your tax advantages. It is an online tool that instantly estimates the amount based on specific home loan information. Some of these factors include the house loan amount, interest rate, current tax deductions, gross yearly wage, and so on. Purchasing a home in India is seen as a big investment choice. As a result, we provide the most appropriate investment advice at a reduced rate as well as additional perks to help you purchase your dream home.

AK Agrawal
AK Agrawal, Chartered Accountant

Aug 3, 2021 14:16

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