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Buying your own house is a dream come true for everyone. The Indian government has always shown a great inclination to encourage citizens to invest in house. This is why a home loan is eligible for tax deduction under section 80C. And when you buy a house on a home loan, it comes with multiple tax benefits too that significantly reduce your tax outgo. Many schemes like Pradhan Mantri Jan Dhan Yojana are flashing green light on the Indian housing sector by striving to bring down the issues of affordability and accessibility. In this article, we will discuss more home loan tax benefit
  1. Deduction for Interest Paid on Housing Loan
  2. Deduction in respect of interest paid towards home loan during pre-construction period
  3. Deduction on Principal repayment
  4. Deduction For Stamp Duty and Registration Charges
  5. Deduction for first time Home Buyers
  6. Deduction for Joint Home Loan

1.Deduction for Interest Paid on Housing Loan

A home loan must be taken for the purchase/construction of a house and the construction of the house must be completed within 5 years from the end of financial year in which loan was taken. If you are paying EMI for the housing loan, it has two components – interest payment and principal repayment. The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh under Section 24. For Assessment Year 2018-19 maximum deduction for interest paid on Self Occupied house property is Rs 2 Lakh. For let out property, there is no upper limit for claiming interest. However, the overall loss one can claim under the head of House Property is restricted to Rs 2 lakh only. This Deduction can be claimed from the year in which construction of the house is completed.

2.Deduction in respect of interest paid towards home loan during pre-construction period

Say, you bought an under-construction property and have not moved in yet. But you are paying the EMIs. In this case, your eligibility to claim interest on the home loan as a deduction begins only upon completion of construction or immediately if you buy a fully constructed property. So does this mean you would not enjoy any tax benefits on the interest paid during the period falling between the borrowing of loan and completion of construction? No. Let’s understand this in detail. The income tax law provides for the claim of such interest also, called the pre-construction interest, as a deduction in five equal instalments starting from the year in which the property is acquired or construction is completed, over and above the deduction you are otherwise eligible to claim from your house property income. However, the maximum eligibility remains capped at Rs 2 lakh.

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3.Deduction on Principal repayment

The Principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to your income in the year of sale.

4.Deduction For Stamp Duty and Registration Charges

Besides claiming the deduction for principal repayment, a deduction for stamp duty and registration charges can also be claimed u/s 80C but within the overall limit of INR  1.5 lakhs. However, it can be claimed only in the year in which these expenses are incurred.

5.Deduction for first time Home Buyers

Additional deduction under Section 80EE is allowed for first time home buyers for maximum up to Rs 50,000. To claim this deduction, the amount of loan taken should be INR 35 lakhs or less and the value of the property does not exceed INR 50 lakhs. The loan must have been sanctioned between 1st April 2016 to 31st March 2017. And on the date of sanction of loan, individual does not own any other house. Section 80EE has been reintroduced effective from FY 2016-17. Earlier the deduction allowed under Sec 80EE was available for 2 years FY 2013-14 and FY 2014-15 only.

6.Deduction for Joint Home Loan

If the loan is taken jointly, then each of the loan holders can claim a deduction for home loan interest up to Rs 2 lakh each and principal repayment u/s 80C up to Rs 1.5 lakh each in their individual tax returns. To claim this deduction, they should also be co-owners of the property taken on loan. So, loan taken jointly with your family can help you claim larger tax benefit.
Deductions Section Maximum Deduction (INR) Conditions
Principal 80c 1.5 Lakh house property should not be sold within 5 years of possession
Interest 24b 2 Lakh loan must be taken for purchase/construction of a w house and the construction must be completed within 5 years from the end of financial year in which loan was taken
Interest 80EE 50,000 Thousand amount of loan taken should be INR 35 lakhs or less and the value of the property does not exceed INR 50 lakhs
Stamp Duty 80C 1.5 Lakh can be claimed only in the year in which these expenses are incurred

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