All you need to know about home loan tax benefit

Home Loan

The easy availability of home loans has bolstered the advancement of India’s real estate sector. Statistics show that the country’s housing loan market expects a growth of around 22% CAGR from 2021 to 2026. The government offers various home loan tax benefits to borrowers encouraging their investment in real estate further. If you are willing to purchase a property on credit in 2021, it is crucial to know some important facts about tax benefits. 

Under the Income Tax Act of India, 1961, tax benefits are available on a housing loan’s two components – principal repayment and interest payable.    

Factors to know about home loan tax benefits

  1. Tax benefits on principal repayment
  1. Under Section 80C, the amount paid towards principal repayment qualifies for a tax deduction of up to Rs.1.5 lakh every year. 
  2. If you sell the same property within 5 years of its purchase, this benefit will be reversed. 
  3. This benefit is available only after the construction of the property is complete. Here, you can check out housing loan tax benefits for under-construction property.  
  1. Tax benefits on interest payable 

Under Section 24 (b), the IT Act of India permits borrowers to claim tax deductions of up to Rs.2 lakh on the payable housing loan interest.    

  1. In the July budget 2019, this maximum amount was extended to Rs.3.5 crore if you purchase a property under the affordable housing scheme.  
  2. The credit must be used for the construction or purchase of a self-occupied property. 
  3. This tax deduction amount shall come down to Rs.30,000 in two situations – 
    • In case property construction isn’t complete within 5 years, starting from the financial year’s end in which you borrow the home loan.
    • If you take the credit for renewal, repair or reconstruction of a self-occupied house property. 
  4. The actual payable interest is deductible if you use the home loan to construct, reconstruct, repair or acquire a rented/let-out property. 
  5. First-time home buyers with stamp duty up to Rs.45 lakh enjoy an additional tax benefit.  
  1. Tax benefits on a joint home loan  

In case of a joint loan, both the borrowers can individually claim home loan tax benefits on principal repayment of up to Rs.1.5 lakh and interest payment of up to Rs.2 lakh. 

  1. Both the loan holders must be co-owners of the property. 
  2. Here, the tax deduction doubles compared to what a single borrower enjoys. 
  1. Tax benefits without a home loan   

Even if you don’t avail of a loan, you can claim tax deductions on registration fees and stamp duty. 

  1. To enjoy this benefit, the total amount of stamp duty and registration fees must be within Rs.1.5 lakh. 
  2. It is also available only in the year of making these payments. 

Before that, you should also check out how much stamp duty and registration charges are imposed on home loans. Additionally, note that you may own more than one self-occupied residential property. In that case, anyone will be accepted as self-occupied for claiming benefits or tax saving on home loan.    

Claiming tax benefits on housing loans

As you’re aware of various tax benefits, it’s time you calculate the deductions to claim on your credit. Opt for a home loan tax benefit calculator that helps in the precise calculation of your tax savings for a particular fiscal. Eliminating manual calculations, this online tool considers the following: 

  • Consumer’s profile type.
  • Home loan payments – principal repaid and interest paid. 
  • Gross annual income for that particular financial year. 
  • Tax deductions under the IT Act, 1961.    

Once you provide accurate details, the tool instantly displays payable income tax before and after the loan and total tax benefit you shall enjoy. 

Opt for a feature-rich housing loan

Besides the above, make sure you avail of a feature-rich home loan to finance your property purchase or construction. Leading HFCs in India offer funds of up to Rs.3.5 crore at competitive housing loan interest rates. You can apply online or even turn to customised pre-approved offers.    

Pre-approved offers not only make the process of loan availing simplified but also make it less time-consuming. Such schemes are applicable to a host of financial products like home loans, loans against property, etc. Provide your name and phone number to check your pre-approved offer online.      

Market uncertainties have compelled individuals to understand the significance of residential property ownership over the years. However, while most borrowers perceive housing loans as high financial liabilities, these can be more affordable when used wisely. Avail of a feature-rich housing loan to invest in the most suitable properties and enjoy home loan tax benefits, as applicable under different slabs.           


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