For security reasons, your session has been timed out. To continue, Please login.
The Indian government has always shown a great inclination to encourage citizens to invest in house. This is why a home loan is eligible for tax deduction under section 80C. And when you buy a house on a home loan, it comes with multiple tax benefits too that significantly reduce your tax outgo.
A home loan must be taken for the purchase/construction of a house and the construction of the house must be completed within 5 years from the end of financial year in which loan was taken. If you are paying EMI for the housing loan, it has two components – interest payment and principal repayment. The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of INR 2 lakhs under Section 24.
The income tax law provides for the claim of such interest also, called the pre-construction interest, as a deduction in five equal instalments starting from the year in which the property is acquired or construction is completed, over and above the deduction you are otherwise eligible to claim from your house property income.
Additional deduction under Section 80EE is allowed for first time home buyers for maximum up to INR 50,000. To claim this deduction, the amount of loan taken should be INR 35 lakhs or less and the value of the property does not exceed INR 50 lakhs. The loan must have been sanctioned between 1st April 2016 to 31st March 2017. And on the date of sanction of loan, individual does not own any other house.
Section 80EE has been reintroduced effective from FY 2016-17. Earlier the deduction allowed under Sec 80EE was available for 2 years FY 2013-14 and FY 2014-15 only.
If the loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest up to INR 2 lakhs each and principal repayment u/s 80C up to INR 1.5 lakhs each in their individual tax returns. To claim this deduction, they should also be co-owners of the property taken on loan. So, loan taken jointly with your family can help you claim larger tax benefit.
The Principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to INR 1.5 lakhs. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise the deduction claimed earlier will be added back to your income in the year of sale.
Besides claiming the deduction for principal repayment, a deduction for stamp duty and registration charges can also be claimed u/s 80C but within the overall limit of INR 1.5 lakhs. However, it can be claimed only in the year in which these expenses are incurred.