Home Loan Tax Benefit

For most people, owning a home is a dream come true. The Indian government has always been keen to encourage residents to invest in real estate. This is why a home loan qualifies for a Section 80C tax deduction. And when you buy a house with a home loan, you get a slew of tax breaks that cut your tax bill dramatically. Many programmes, such as the Pradhan Mantri Jan Dhan Yojana, are shining a bright light on the Indian housing market by attempting to address issues of affordability and accessibility. In this article, we will go over all of the home loan income tax benefits and deductions.

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Deduction for interest paid on housing loan

A home loan is required for the purchase or construction of a home. If it is used for home improvement, it must be completed within five years of the end of the fiscal year in which the loan was obtained. If you pay an EMI for a home loan, it comprises two components:

Payment of interest
Principal repayment


In India, the national average of a bank manager salary is Rs 7,87,500 per year. Section 24 allows you to deduct the interest part of your EMI payments for the year up to a maximum of Rs 2 lakh from your total income. The maximum deduction for interest paid on self-occupied residential property is Rs 2 lakh beginning with the tax year 2018-19. There is no upper limit for claiming interest on rented property. However, the total loss that can be claimed under the heading ‘House Property’ is limited to Rs 2 lakh. This deduction is available beginning with the year in which the house is constructed.

Deduction on interest paid towards home loan during the pre-construction period

The Income Tax Act allows for a deduction for such interest, known as pre-construction interest. Over and above the deduction you are otherwise able to claim from your house property income, a deduction in five equal installments beginning with the year the property is acquired or construction is finished is allowed. However, the maximum eligible amount remains at Rs 2 lakh.

Deduction on principal repayment

Section 80C allows a deduction for the principal component of the EMI paid for the year. The total sum that can be claimed is Rs 1.5 lakh. However, in order to claim this deduction, the house must not be sold within five years of possession. Otherwise, the previous deduction will be applied back to your income in the year of sale.

Deduction for stamp duty and registration charges

In addition to the deduction for debt repayment, a deduction for stamp duty and registration expenses can be claimed under Section 80C, but only up to Rs 1.5 lakh. However, it can only be claimed in the year in which the expenses are spent.

Deduction for a joint home loan

If the loan is obtained jointly, each loan holder can claim a deduction in their tax returns for house loan interest up to Rs 2 lakh and principal repayment under Section 80C up to Rs 1.5 lakh. To be eligible for this deduction, they must also be co-owners of the property lent. As a result, if you take out a loan with your family, you will be able to claim a higher tax benefit.

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