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Are There Tax Benefits When You Avail a Home Loan?

Considering a house loan? With the tax benefits provided by the Government of India under the Income Tax Act of 1961, you can save a significant amount of money each year.

If you are a first-time purchaser, you can claim a tax exemption on principle repayment under Section 80C, interest payments under Section 24 (b), and an additional advantage on interest under Section 80EE.

Tax Benefit for Home Loans Section 80C 

Home loan borrowers can claim an income tax deduction of up to Rs 1.5 lakh on the principal amount returned throughout the year under Section 80C of the Income Tax Act.

There are some conditions that must be met in order to obtain tax benefits under this section:

Before you can claim a deduction under Section 80C, the house must be completely built.

Within the first five years of possession, you must not transfer or sell the property. If you sell your home within five years, the deductions you’ve already claimed will be counted against your income in the year of the sale.

Tax Benefits for Home Loans In accordance with Section 24(b)

You can claim an income tax deduction of up to Rs 2 lakh on your home loan interest payments under Section 24(b) of the Income Tax Act. You can calculate your emi and interest online using a home loan emi calculator.

Examine the following conditions for claiming tax benefits under this section:

  • Only if the property is self-occupied is the maximum of Rs 2 lakh applicable.
  • There is no maximum restriction for claiming interest if the property is rented out (or not self-occupied).
  • Within 5 years of receiving the loan, you must either acquire the property or complete the building.

Section 80EE Tax Benefits for Home Loans

You can claim a tax deduction under Section 80EE if you are a first-time purchaser. This clause allows for a tax deduction of up to Rs 50,000 on housing loan interest payments. In other words, this deduction is in addition to the Section 24 exemption of Rs 2 lakh (b).

Take a look at some of the requirements for claiming tax benefits under Section 80EE:

  • The loan had to be taken between April 1, 2016 and March 31, 2017.
  • It should be the borrower’s first real estate investment.
  • The house should not be worth more than Rs 50 lakh, and the home loan should not exceed Rs 35 lakh.

Income Tax Deduction for Interest Paid on Affordable Housing Loans (Section 80EEA)

The Finance Minister, Nirmala Sitharaman, introduced this provision in the 2019 Union Budget with the goal of strengthening the “housing for all by 2022” initiative.

Homebuyers can deduct an additional Rs 1.5 lakh in interest payments on their house loan under Section 80EEA. This is in addition to the Rs 2 lakh tax exemption limit set under Section 24. (b).

The Finance Minister extended the benefits under this clause till March 31, 2022, while presenting the Union Budget for FY 2021-22.

What are the Tax Benefits of Joint Home Loans?

If you apply for a house loan with a partner, you can get more tax benefits. You and all other co-applicants can claim income tax benefits separately if you have a joint house loan. Each co-applicant can claim a tax deduction of up to Rs 2 lakh for interest payments and Rs 1.5 lakh for principle repayment.

Make sure that each co-applicant is also a co-owner of the property to be eligible for tax benefits.

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