Buying your own house is a dream come true for everyone. And when you buy a house on a home loan, it comes with multiple tax benefits that significantly reduces your tax outgo.
Here are all the deductions that can be claimed for a Home Loan:
- Deduction for Interest Paid on Housing Loan
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 lakhs u/s 24.
For Assessment Year 2016-17 maximum deduction for interest paid on Self Occupied house property is 2 Lakhs. For let out property there is no upper limit for claiming interest.
However, the loan must be taken for the purchase/construction of the new house and the construction of the house must be completed within 5 years from the end of financial year in which loan was taken.
This Deduction can be claimed from the year in which construction of the house is completed.
- Deduction on Principal repayment
The Principal portion of the EMI paid for the year is allowed as deduction u/s 80C. The maximum amount that can be claimed is up to Rs 1.5 lakhs. 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.
- 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 Rs 1.5 lakhs. However, it can be claimed only in the year in which these expenses are paid.
- Deduction for first time Home Buyers
Additional deduction under sec 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 Rs 35lakhs or less and the value of property does not exceed Rs 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.
Sec 80EE has been reintroduced effective from F.Y 2016-17.Earlier the deduction allowed under Sec 80EE was available for 2 years F.Y 2013-14 and F.Y 2014-15 only.
- Deduction for Joint Home Loan
If the loan is taken jointly, then each of them can claim a deduction for Home loan interest up to Rs 2lakhs each and principal repayment u/s 80C up to Rs 1.5 lakhs 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.
|Principal||80c||1.5 Lakhs||house property should not be sold within 5 years of possession|
|Interest||24b||2 Lakhs||loan must be taken for purchase/construction of the new house and the construction must be completed within 5 years from the end of financial year in which loan was taken|
|Interest||80E||50,000||amount of loan taken should be Rs 35 lakhs or less and the value of property does not exceed Rs 50 lakhs|
|Stamp Duty||80C||1.5 Lakhs||can be claimed only in the year in which these expenses are paid|