Home Loan Tax Benefit (FY 2023-24): How To Save Tax On Your Home Loan?

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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.

Tax Benefit Sections	Maximum Deduction (Per Annum)	Conditions
Section 24b	Up to Rs 2 lakh	Rs 2 lakh limit applies to self-occupied property; no upper limit for rented or deemed-to-be-rented properties.
Section 80C	Up to Rs 1.5 lakh	Applicable for principal repayment.
Section 80EEA	Up to Rs 50,000	Additional deduction for first-time homebuyers meeting specific criteria.

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

When it comes to Joint Home Loans, co-owners have the advantage of claiming additional deductions. Each co-owner can avail these deductions individually, based on their share in the Loan and property.

Tax Benefit Sections	Component	Maximum Deduction	Conditions
Section 24(b)	Interest	Up to Rs 2 lakh	Applicable for buying or constructing a new house, which must be completed within five years from the financial year end in which the loan was availed.
Section 80EEA	Interest	Up to Rs 1.5 lakh	Applicable for a property with a stamp value of up to Rs 45 lakh.
Section 80EE	Interest	Up to Rs 50,000	Applicable for a loan amount of up to Rs 35 lakh and a property value of up to Rs 50 lakh.
Section 80C	Principal	Up to Rs 1.5 lakh	Applicable if the sale of the property is not done before five years of possession is completed.
Section 80C	Stamp Duty	Up to Rs 1.5 lakh	Must be claimed in the same financial year as it was spent.

Joint home loan borrowers can take advantage of these deductions, provided they meet the specific conditions mentioned above. Exploring these opportunities to maximise tax benefits and consult experts for accurate guidance is essential.

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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