The maximum home loan benefit that can be claimed as a deduction in India is as follows:-

Thus, as is clear from the above table, deduction can be claimed for both interest and principal amount under various sections of the Income Tax Act. These sections along with the allowed deductions are discussed in detail in this article.

Section 80C: Tax benefit on home loan (principal amount)

Amount paid by an individual as repayment of the principal amount of the home loan/HUF Tax deduction is allowed under section 80C of the Income Tax Act. The maximum tax deduction allowed under section 80C is Rs. 1,50,000.

This tax deduction is the sum total of the deduction allowed under section 80C and includes the amount invested PPF Account, tax saving fixed deposit, Equity Oriented Mutual Fund, national savings certificate, Senior Citizen Savings Scheme e.t.c.

This tax deduction under section 80C is available on payment basis, irrespective of the year for which the payment is made. amount paid as stamp duty And registration fee is also allowed as tax deduction under section 80C even if the assessee has not taken a loan.

However, home loan has tax benefit under this section for repayment of home loan principal Permission only after construction is complete And the completion certificate has been provided. No deduction shall be allowed under this section for the repayment of principal for the years during which the property was under construction.

Also, if you are planning to buy an under construction property as it is priced at a lower price than a fully completed property, you are also requested to note here that GST is applicable on under-construction property also., However, no GST is levied on properties on which construction is fully completed.

The house property should not be sold within 5 years

Section 80C(5) It also states that if the assessee transfers the house property on which he has claimed tax deduction Section 80C No deduction and tax benefit will be allowed on home loan under section 80C if the possession is obtained by him before the end of 5 years from the end of the financial year. The aggregate amount of tax deducted already claimed in respect of the previous years shall be deemed to be the income of the assessee for the year in which the property is sold and the assessee shall be liable to pay tax on such income.

Tax Benefit on Home Loan (Interest Amount)

Interest paid on home loan can be claimed as deduction under Tax benefit on home loan section 24 as well as under newly inserted section 80EEA (amended by budget 2020)

Section 24: Income tax benefit on interest on loan for purchase/construction of immovable property

Tax benefit on home loan for payment of interest is allowed as deduction under section 24 of the Income Tax Act. As per section 24, income from house property shall be reduced by the amount of interest paid on loan Where the loan is taken for the purpose of purchase/construction/repair/renovation/reconstruction of the property.

a . Maximum tax deduction allowed under section 24 of self-occupied property. subject to the maximum limit of Rupee. 2 lakh (Increased from Rs 1.5 lakh to Rs 2 lakh in Budget 2014).

please pay attention: If any property is not self-occupied by the owner by reason of his employment, business or profession carried on at any other place, he has to reside at that other place which does not belong to him, then the amount shall be allowed under section 24. The deduction will be Rs. 2 lakh only.

It is also important to note that this tax deduction of interest on loan under section 24 is deductible on payable basis, i.e. accrual basis, Therefore, deduction under section 24 can be claimed on annual basis even if no payment is made during the year as compared to section 80C, which allows deduction on payment basis only.

In addition, if the property is not acquired / manufactured completed within 5 years from the end of the financial year The interest benefit in the case in which the loan was taken would be Reduced from 2 lakhs to 30 thousand rupees Only. (The limit has been increased from 3 years to 5 years from FY 2016-17 onwards).

The quantum of deduction allowed for payment of interest on home loan under section 24 is summarized below:-

Deduction for non-self-occupied property {Budget 2017 Update}

In case of non-self-occupied property, the interest paid is deducted from the rent paid to calculate the income from the house property. In some cases, it may happen that the interest paid is more than the rent earned which will result in loss from the house property. This loss is allowed to be set off against income from any other head.

The Finance Act 2017 announced on 1st February 2017 has put a restriction on the maximum amount of loss under head house property that can be set-off from other heads of income. From the financial year 2017-18, a maximum of Rs. 2 lakh is allowed to be adjusted against income from other heads. The amount which is not set-off will be carried forward for future years.

These new provisions included in the Income Tax Act are explained very well in this link – Income tax treatment of loss due to house property,

Thus, the maximum deduction for interest that can be claimed for self-occupied property is Rs. 2 lakh and for non-occupied property – the loss under the head house property should not exceed Rs. 2 lakhs (i.e. rent received – standard deduction – property tax – interest expeditiously should not exceed Rs. 2 lakhs). In case of self-occupied property, interest in excess of Rs. 2 lakh will lapse and cannot be claimed as deduction, whereas in case of non-self-occupied property, loss from house property which exceeds Rs. will get 2 lakhs carried forward to the next year and allowed to claim in the following year.

Income Tax Treatment of Pre-Construction Interest

In many cases, the amount is paid for the purchase of the property even before the construction is completed. Some home buyers buy property on loan before construction is completed and start paying EMIs to the bank.

In such cases, section 24 specifically states that Tax deduction will not be allowed for payment of interest before completion of construction, in such cases,

1. If the loan is taken for repair/renovation/reconstruction purposes, No tax deduction is allowed for interest paid before completion
2. If the loan is taken for the purpose of purchase/construction: The interest paid before the completion of the construction has to be collected and the entire total amount will be allowed as tax deduction in 5 equal installments for 5 financial years commencing from the year in which the construction is completed.

For example: Mr. A bought a house in 2009 in New Delhi and took a loan of Rs. 10,00,000 The construction work was completed in April 2011 from a bank paying interest at the rate of 10% per annum.

Now, as per Section 24 of the Income Tax Act, tax deduction will be allowed only for payment of interest from the financial year 2011-12. However, the interest paid on the loan before the completion of construction (ie Rs. 2,00,000) will be allowed as tax deduction for the next 5 financial years @ 40,000 p.a. starting from the financial year 2011-12. (Easy quantities are taken in this example for the purpose of simplification)

important point:-

1. Tax is not allowed to be deducted on interest paid towards arrears (Kisan Bhattar v. CIT (1973) 89 show ITR 61 (SC))
2. This tax deduction will be available only if the construction is completed within 5 years from the date of completion financial year in which capital is borrowed
3. The taxpayer cannot claim any deduction for the commission paid for arranging the loan.
4. If the taxpayer is not earning any income from house property but is paying municipal tax and int on home loan, it will result in loss under the head Income from house property. This loss arising under the head Income from house property is allowed to be Adjustment against income from various other heads in the same financial year.
5. If the loss cannot be adjusted against income from other sources in the same financial year, the loss can be carried forward to future years and set against income from house property for the next 8 financial years. Can be turned off.
6. The tax benefit of interest on home loan can be claimed only by a person who has acquired or constructed the property with the amount borrowed. It is not available to the heirs of the property.

For the purpose of simplicity and ease of understanding, here is a comparison of tax benefits on home loan under section 24 and section 80C:-

Section 80EEA: Income Tax Benefit on Interest on Home Loan (First Time Buyer)

Interest deduction can also be claimed under section 80EEA in excess of the deduction that can be claimed under section 24 of Rs. 2 lakh and above deduction of Rs. Section 80C. 1.5 lakh under

This deduction of section 80EEA will be applicable only in the following cases:-

1. This deduction will be allowed only if the stamp duty value of the property purchased is less than Rs. 45 lakhs.
2. The loan should be sanctioned between 1st April 2019 and 31st March 2022.

The above 3 sections related to tax benefits on home loan are summarized as follows:-

please pay attention:-

1. The above tax deduction is per person and not per property. So if you have bought property jointly and taken joint home loan, each person paying the amount will be eligible to claim full deduction separately.
2. If you are living in a rented house and taking Tax Benefit of HRA Allowanceyou can still claim Tax Benefit on Home Loan Under Section 24, Section 80EEA and Section 80C.
3. If a person is opting for the new slab rates announced in Budget 2020, they will not be able to claim the benefit of any of these deductions.

To claim the above tax deduction, you need to provide the details provided by the lender clearly indicating the amount payable and interest and principal paid. After claiming the above deduction of tax benefits on home loan, the remaining income of an individual will be taxed as per the income tax slab rates. (Recommended Read: Income Tax Slab Rates,

If you have any further queries regarding claiming deduction u/s 80C for principal repayment or u/s 24 for principal repayment, you can also watch the following video in which the author of this article queries the user on the TV show Responding Live:-

If you need further assistance regarding the tax benefits of home loan, you can book an appointment with the author of this article and get all your queries resolved – Book an appointment with CA Karan Batra