The Income Tax Act of 1961 offers a number of home loan tax deductions and encourages
residents to invest in real estate. Home loan borrowers should be aware of all available home loan
tax deductions because doing so can allow you to significantly reduce your tax liability.
These are
the tax benefits or income tax deductions on home loans that every home loan
borrower should be aware of.
Discount
when paying the principal of the home loan
The EMI you
pay consists of two parts: the principal repayment and the interest paid. The
principal component of EMI is deductible under Section 80C of the Income Tax
Act of 1961 for self-occupied property. Section 80C deductions can also be
claimed for stamp duty and filing fees paid when you purchased a home.
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Discount on interest paid on a mortgage loan
The taxpayer
can deduct both the interest paid on a mortgage loan and the principal amount
paid on the loan. For the case of a self-occupied property, section 24(b)
allows the deduction of interest paid on the mortgage loan up to a maximum of
Rs 2 lakhs in any given financial year.
If you own
two houses and one of them is vacant or occupied by your parents, Section 24
also covers interest on any loans to buy another house. The total tax deduction
for home loans for two houses cannot exceed Rs. 2 lakhs in the fiscal year.
Additional
discount on the purchase of an affordable home
An
additional discount on the interest paid on the mortgage loan used to purchase
the home is available if you purchase it in the affordable housing category. Rs
1.5 lakh may deduct under section 80EEA in the financial year. A maximum of Rs
2 lakh plus deduction is allowed under section 24. Thus, a taxpayer can claim
up to Rs 3.5 lakh deduction in a tax year in case of buying a reasonable house.
Please note
that you cannot claim the same amount twice in two different tranches like as
claim U/s 24 B and 80EEA
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Deduction
under Section 80EE
For the
1st-time home purchases taking out mortgage loans, this deduction was reinstated
in the 2016-17 tax year. Taxpayers who got a home loan in the 2016-2017 tax
year he is eligible to claim an extra tax deduction U/s 80EE of up to Rupees
Fifty Thousand. Recently, under section 24(B), a home loan borrower who paid
interest on the loan can deduct that interest from his total annual income up
to a maximum of Rs 2 lakh.
To be
eligible for this discount, you must meet the following requirements:
a) Only
residential properties will be eligible for the increased loan interest
deduction.
It is only
available to first-time homebuyers.
c) The
annual maximum fringe benefit is limited to Rs. 50,000.
d) The value
of the house cannot exceed Rs. 50 lakh when applying for a loan.
e) The loan
cannot be for more than Rs 35,000.
f) The home
loan may be sanctioned between April 1, 2016, and March 31, 2017.
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If you
already obtained a home loan in the 2016-2017 tax year, you can still claim
this discount until the loan is paid off in full. This tax benefit is not
available for new home loans obtained after April 1, 2017.
How do I claim tax benefits under Section 80EEA?
To qualify
for benefits under Section 80EEA, a person must meet a number of requirements.
These requirements are the following:
a) The home
loan entitled from 1st April 2019, and 31 March 2022;
b) Stamp
duty on house property cannot exceed Rs. 45 deficiencies;
c) a
taxpayer may not own any residential property as of the date the loan is
sanctioned, and d) an individual taxpayer may not be eligible for a deduction
under current Section 80EE of the Act.
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