What Are The Tax Benefits On Home Loans?

Today, owning a property can be quite an achievement, especially when property rates reach the sky. Nevertheless, the Indian Government is taking several initiatives to encourage people to invest in property. One of the initiatives is Home Loan with tax benefits.

When you apply for a Home Loan, it is eligible for a tax deduction under Section 80C. It can provide income tax benefits of up to Rs. 1.5 Lakh. This substantially reduces your financial burden in the long run.

In this article, let us learn more about the different tax benefits on Home Loans.

What are the Repayment Components of a Home Loan?
In a Home Loan, you are paying the Equated Monthly Instalment (EMI) for two primary components of the loan:

  • The principal amount
  • Interest payment

    The tax benefits of Home Loans apply differently on these components, and the tax deductions of these components come under different Sections of the Income Tax Act.

What are the Different Home Loan Tax Sections?
The three Sections of the Income Tax Act that provide deductions on Home Loans are:

SectionComponent of the Home LoanMaximum Rebate
Section 80CDeduction on principal amountRs. 1.5 Lakh
Section 24(b)Deduction on the interest amountRs. 2 Lakh
Section 80EEDeduction for first time buyersRs. 50,000

​​​​​​​Section 80C

  • You can claim a maximum of Rs.1.5 Lakh from your income on the principal amount.
  • You cannot sell this property for at least five years if you want to claim the deductible. If you sell it, the deduction you got will be added back to your income in the year of the sale.
  • You can also claim a deduction for registration and stamp duty charges under Section 80C.

    Section 24(b)
  • Under Section 24(b), you can claim a Home Loan tax deduction of up to Rs. 2 Lakh on the interest amount.
  • This deduction only applies to properties whose construction is complete under five years. If it takes more than five years, you can only claim Rs. 30,000.
  • For Let-Out Properties, there is no upper limit on the interest claim.

    Section 80EE
  • First-time house buyers can claim a deduction up to RS. 50, 000 on the payable interest every financial year.
  • To claim this deduction, the Home Loan amount should not exceed Rs. 35 Lakh and the stamp value of the property should not exceed Rs. 45 Lakh.

    What are Some Other Tax Benefits on Home Loans?
    If you take a joint Home Loan, the individual loan holders can claim a deduction for home loan interest up to Rs 2 Lakh each. Furthermore, they can also claim the principal repayment under Section 80C up to Rs 1.5 lakh each in their tax returns.

    It is necessary to be co-owners of the property to claim deduction on the Home Loan. Any family member or friend can opt to be a co-owner.

    If you take another Home Loan to purchase a second house, the tax benefits apply to the payable interests. You can claim the entire interest amount. Before you apply for a home loan, it is better to seek professional guidance and make an informed decision.

    To apply for a Home Loan, click here.

    Want to know about the tax benefits on a second Home Loan? Click here to read more.

    ​​​​​​​*Terms and conditions apply. Home Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.