Home Loan Tax Benefit (FY 2023-24): How To Save Tax On Your Home Loan?
With the rising real estate prices across the country, buying a house with your own money is not a feasible option for most. Home loan is the go-to option for such buyers. While a home loan can help you realise your dream of owning a home, it can also help you save a considerable amount of money in taxes.
Income tax benefit on home loan
There are three different sections of the IT Act under which a home loan is eligible for deductions. A home loan is made up of two components- principal and interest. It is possible for you to claim deductions on repayment of both of these components as per the income tax laws. Let us have a detailed look at these home loan tax benefit sections-
1. Home Loan Tax Benefits under Section 80C
Under Section 80C of the IT Act, you can claim tax deductions on the principal amount you repay to your lender. This deduction is also applicable to the registration and stamp duty charges of your home.
The maximum housing loan tax exemption under Section 80C is Rs. 1.5 lakhs in a financial year. Note that there are several other investment options such as ELSS funds, PPF, and tax-saving FD, which are also eligible under section 80C. Even if you have invested in such instruments, the deduction limit will remain the same at Rs. 1.5 lakhs.
2. Home Loan Tax Benefits under 24(b)
Section 24(b) offers income tax rebate on home loan but only on the interest part of the loan. It is also applicable if you have taken a loan for home construction or renovation. The deduction is applicable on the prepayment charges and processing charges you pay to your lender.
If you have rented out the purchased property, you can claim full interest payment deduction. However, if you have occupied the property, the deduction limit is Rs. 1.5 lakhs in a financial year.
3. Housing Loan Tax Benefits under 80EE
This tax saving on the home loan is only applicable for first-time home buyers. If you have purchased a home for the first time, you can claim additional deductions of up to Rs. 50,000 under section 80EE if you fulfil a few conditions.
To claim this benefit, the home loan amount can only be up to Rs. 35 lakhs and the cost of property cannot be more than Rs. 50 lakhs.
Deduction for Joint Home Loan
If you have taken a joint home loan, each loan holder is allowed to claim home loan interest deduction of up to Rs. 2 lakhs and home loan principal deduction of up to Rs. 1.5 lakhs.
However, to take benefit of this deduction, each of the joint loan holder should also be co-owner of the property. So, if you are looking for higher income tax benefit on the home loan, a joint home loan can be an excellent option.
Selecting the right lender for home loan
With so many ways to save taxes with a home loan, it is often confusing for first-time borrowers to take maximum benefit of the available deductions. As a result, it is essential to choose a lender very carefully. Go for a reputed lender that can offer detailed guidance on home loan tax exemption laws.
This will not only allow you to fulfil your dream of purchasing a house but also save a considerable amount on tax payments.
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