Here are Possible Cases to Avail Tax Benefits on a Home Loan

A homeloan is the ideal financial product that prospective homeownersutilise to meet the finances required for their purchase.

Home loans are also an avenueof investment to enjoy deductions from your income tax. You can claim home loan tax exemptions under two sections of the Income Tax Act,1961.

Section 80C allows making claimtax exemptions of up to Rs. 1.5 Lakh per year on the home loanprincipal, stamp duty, and registration fee.

Section 24b enables you toclaim tax exemptions of up to Rs. 2 Lakh on the home loan interest.You can only make claims under this Section after the construction orpurchase of your house is complete. Benefits for the pre-constructionphase is provided in five equal instalments beginning from the yearthe construction is completed.

These two exemptions areavailable to you each year throughout the tenor of your home loan.

Income Tax Exemptions In Other Cases

You can also avail income tax benefits when availing loans other than a home loan. Such exemptions are available in the following circumstances:

  • Personal Loan For Home Construction, Purchase, And Down Payment – Section 24b is applicable in case you have availed a personal loan to construct or purchase a property. This Section also allows you to make a claim when you have availed a personal loan to contribute the down payment for your home loan. The home loan tax exemption limit is the maximum in such cases – Rs. 2 Lakh. Do note that Section 80C is not applicable in the above circumstances.
  • Home Improvement Loan – A home improvement loan is a type of personal loan used to renovate or improve your house. Section 24 is also applicable to these loans. However, the maximum home loan tax exemption you get is limited to Rs. 30,000.

Income Tax Benefit on Joint Home Loans

Income tax benefits under Section 80C and Section 24b are applicable on joint home loans also. However, the applicants have to co-borrowers of the loan – they must contribute to the EMIs and co-owners of the property – both their names must appear on the property documents.

Each borrower can claim the maximum deduction under these Sections. Hence, the tax saving on a home loan is the highest in case of joint home loans, Rs. 3 Lakh on principal and Rs. 4 Lakh on interest.

There are some conditions that borrowers have to follow to make these claims:

  • They cannot sell the property within 5 years of construction or purchase to claim benefits under Section 80C.
  • They have to complete the construction or purchase of the property within 5 years to claim income tax deductions under Section 24.

Joint home loans are available from several NBFCs, Bajaj Finserv being one of them. The company offers Home Loans of up to Rs. 3.5 Crore with competitive interest rates.

Calculate Home Loan Tax Benefits

A home loan tax benefit calculator can help you calculate the income tax you save in a year. Several financial institutions provide this calculator on their official website.

Using this tool is hassle-free, and you only have to enter data like your home loan amount, interest rate, tenor, loan commencing date, your annual income, any other deductions under 80C.

There are other home loan tax saving calculators where you only have to enter your housing loan interest, principal and amount to calculate. Apart from calculating your income tax benefit, use a home loan EMI calculator to check the monthly instalments you have to pay before applying.


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Written by Anamika Verma

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