5 Different Tax Benefits Of Taking Home Loan In India

February 16, 2018

5 Different Tax Benefits Of Taking Home Loan In India

Buying a new home is very much like dream come true for everyone. It is one of the valuable assets that stays with us for the lifetime; offering lot of benefits to the buyer. Buying your first home comes with multiple tax benefits that not all are aware of. These tax deductions not only reduces your tax out go but; also helps in managing the cash flow in a better way.

Buying a home is a big step. It is mix of anxiety, and a huge sense of accomplishment. With the zooming property prices rising, it is tough especially; for a salaried person to buy a home.  One may require emptying his/her savings entirely. When considering buying a home; there’s a huge amount of investment where one needs to be very careful. By planning meticulously when getting home loans, you are surely offered with substantial tax benefits.

Below Are The 5 Major Tax Benefits To Claim When You Take Home Loans In India

home loan



1. Deduction On Interest

If you are paying EMIs for the home loan you took to buy a house, the interest component in the EMI can be claimed as deduction. You must be both an owner and a co-borrower to claim the tax benefits. Therefore; the deduction can be claimed in beginning of the year in which the construction of the house is completed.

For example; the construction of your house was completed in August 30, 2014, you can claim deduction for interest for the entire 12 months in financial year 2014-15. Hence; every year a maximum of Rs. 2 lakh can be claimed for a house that you use for your own residence. If your house is rented, the entire interest for the year can be claimed as deduction.

2.Deduction Under Pre-construction Interest

While deduction for interest can be claimed starting the financial year in which the construction is completed, you can also start claiming pre-construction interest from the same year. You need to add up the entire pre-construction interest and claim it in five equal installments. The total deduction, however, should not exceed Rs. 2 lakh when the house is being used by you for your own residence.

home loan


Deduction on principal repayment: The component of your EMI which goes towards principal is eligible to be claimed under Section 80C of the Income Tax Act. You can sum up the outgo for the year towards principal and claim it. Therefore; a maximum amount of Rs. 1.5 lakh can be claimed as deduction under Section 80C.

3.Deduction On Stamp Duty As Well As Registration Fees

Besides the deduction allowed on principal repayment, payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C. However, these can only be claimed in the year in which these were paid.

4.Deduction Under Section 80EE

This section has been given to offer a tax benefit to the first time home owners. The tax benefit can be availed when the value of the house is Rs. 40 lakh or less and the amount of loan taken is Rs. 25 lakh or less. To claim this tax deduction, the home loan should have been sanctioned between April 1, 2013 to March 31, 2014.

There is a maximum deduction of Rs. 1 lakh available under this section. This additional deduction can be claimed in financial years 2013-14 and 2014-15 spread over these two years or in any one year. The total deduction allowed under Section 80EE must not be exceed of Rs. 1 lakh.

This section lapses in the current financial year 2015-16. Hence; if you happen to meet all the conditions laid out in Section 80EE, do remember to claim the deduction while filing your tax returns for financial year 2014-15.


5. Deduction On Principal Repayment

The principal component of your EMI that goes towards principal is eligible to be claimed under Section 80C of the Income Tax Act. You can sum up the outgo of the same for the year towards principal and can claim it. Hence; the maximum amount of Rs. 1.5 lakh can be claimed as deduction under Section 80C.


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February 16, 2018

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