If you are repaying home loan, both your principal and interest repayment can be claimed as a deduction under the old regime. If the property is rented out, the interest repayment can fully be claimed even under new regime. Other deductions can be claimed only under the old regime. There are limits fixed for principal and interest repayment in section 80C and section 24 of the Income Tax Act.
Home Loan Tax Benefits - An Overview
The maximum limits for deductions available against interest and principal paid during the financial year are presented in a table below:
Deduction
Principal / Interest
Maximum Limit
Section 80C
Principal
Rs. 1.5 lakhs
Section 24
Interest
Self Occupied Property: Rs. 2 lakh
Let Out Property: Entire interest can be claimed - irrespective of regime
Section 80EE
Interest
Rs. 50,000
Section 80EEA
Interest
Rs. 1.5 lakhs
Deduction on Principal Repayment under Section 80C
The principal paid on the home loan EMI for the year is allowed as a deduction under section 80C.
The maximum amount that can be claimed under this section is up to Rs 1.5 lakh.
But to claim this deduction, the house property should not be sold within five years of possession.
Otherwise, the deduction claimed earlier will be added back to your income in the year of sale.
This deduction is not available if the taxpayer files his return under the new regime.
Deduction for stamp duty and registration charges can also beclaimed under Section 80C but within the overall limit of Rs 1.5 lakh.
Deduction for Interest Paid on Housing Loan u/s 24
Interest under section 24 need not be actually paid to claim the deduction. As soon as the interest falls due for a financial year, deduction can be claimed. The following are the provisions related to interest deduction on home loan.
1. Eligibility Criteria
The following conditions must be satisfied for claiming interest deduction under section 24.
The loan should be obtained for purchase, construction, repair* or renovation of the house property.
The construction should be completed within 5* years from the end of the financial year in which loan was taken.
*If the loan is availed for repair or renovation of a house, maximum deduction Rs. 30,000 can be claimed. Also, if the construction took more than 5 years, Rs.30,000 deduction can still be claimed.
Maximum of Rs. 2 lakh interest due can be claimed as a deduction.
Interest paid on self occupied house property is not available under the new regime.
For a rented out property:
Full interest paid can be claimed as a deduction, without any maximum limit.
This deduction can be claimed by the taxpayer under both old and new regime.
Deduction on Interest During Construction
Pre-construction period: Time period during which property is still under construction is called pre construction period
Mechanism: Pre-construction interest is allowed as a deduction in five equal parts, beginning in the year construction finishes.
Maximum Limit: The overall limit of 2 lakhs for self occupied property includes pre construction interest.
Illustration
You availed a home loan in April 2022 for construction and paid an interest of Rs 10,000 a month. Construction of the house was completed in April 2024 after two years.
Hence, you can start claiming the pre-construction interest of Rs 2.4 lakh (approx) paid by you only after the construction gets completed starting from the year 2024-25.
Maximum interest deduction under Section 24(b) is capped at Rs 2 lakh (including current year interest + pre-construction interest). So if you paid interest of Rs. 1,20,000 during the year 2024-25 then you can claim a total interest deduction of Rs. 1,68,000 (i.e., Rs. 1,20,000 as current year interest and Rs. 48,000 as 1/5th installment of pre-construction interest).
Deduction for Joint Home Loan
If the loan is taken jointly, each loan holder can claim a deduction for home loan interest up to Rs 2 lakh each and principal repayment under Section 80C up to Rs 1.5 lakh each in their tax returns.
To claim this deduction, they should also be co-owners of the property taken on loan. So, a loan taken jointly with your family member can help you claim a larger tax benefit.
Additional Deduction under Section 80EE
Additional deduction underSection 80EE is allowed to the home buyers for a maximum of up to Rs 50,000. To claim this deduction, the following conditions should be met:
The amount of loan taken should be Rs 35 lakh or less, and the property’s value shall not exceed Rs 50 lakh.
The loan must have been sanctioned between 1st April 2016 to 31st March 2017.
And on the date of loan sanction, the individual does not own any other house, i.e. first-time house owner.
This deduction is not available if the taxpayer files his return under the new regime.
Additional Deduction under Section 80EEA
Under Section 80EEA, deduction can be claimed by first time homebuyers for a maximum of up to Rs 1.5 lakh. To claim this deduction, below mentioned conditions should be met:
The stamp value of the property does not exceed Rs 45 lakh.
The loan must have been sanctioned between 1 April 2019 to 31 March 2022 (extended from 31 March 2021)
On the date of loan sanction, the individual does not own any other house, i.e. first time home buyer.
The individual should not be eligible to claim a deduction under Section 80EEA if claiming a deduction under Section 80EE.
This deduction is not available if the taxpayer files his return under the new regime.
Loss under the Head House Property
There is a probability your house property income resulting in losses, because of interest claimed under section 24.
This loss can be set off against income under other heads.
However, the maximum house property losses that can be set-off against other heads is Rs. 2 lakhs only.
Losses exceeding Rs. 2 lakhs can be carried forward for future set off.
If net income from let out property results in loss, then such loss will be allowed to set off against profit from another house property but not allowed to set off against other heads of income like salary or other sources under the new regime.
Only the owners of the property can claim tax deduction on home loans. If the home loan is taken jointly with a spouse, each borrower can claim deduction on home loan interest in the ratio of their ownership.
How much tax benefit do I get on home loan?
The tax benefit for a home loan as per different sections in Income Tax Acts is listed below
Up to Rs 2 lakh under Section 24(b) for self-occupied home (No limit in case of let out property)
Up to Rs 1.5 lakh under Section 80C
Who is eligible to claim tax deductions on home loans?
The property owner is eligible to claim tax benefits, and if the spouse is a co-borrower, they can also apply for tax deductions. In the case of a joint loan, both parties can claim tax benefits based on their respective share of the loan payments.
Are there any tax benefits on second home loan?
Yes. When the first home is self-occupied and the second home is vacant, it will be considered as self-occupied. In such a case, a tax deduction can be claimed on the interest paid for both houses. However, it cannot exceed Rs 2 lakh.
Can my spouse claim income tax deduction when we buy the house jointly?
Yes, your spouse can claim separate deductions in IT returns when both of you own the property and joint loan has been applied. Both of you can claim deduction under Section 80C up to Rs 1.5 lakh towards the principal component and deductions up to Rs 2 lakh on the interest.
Can I claim tax benefits if the purchase a property with a home loan but the house is under construction?
Yes. You can claim deduction for loan taken for a property under construction. But you have to claim it once the construction is completed.
What is the limit of home loan interest in income tax?
The maximum amount of interest that can be claimed as a deduction is Rs. 2 lakh per annum for a self-occupied property and there is no upper limit for a let-out property. Under the new regime, the interest paid on self occupied property cannot be claimed as deduction.
Can I claim tax benefits on a home loan taken for the renovation of a property?
Yes, tax benefits on a home loan taken for the renovation of a property can be claimed under Section 24 of the Income Tax Act, 1961, up to a maximum limit of Rs. 30,000 per annum.
Can you claim deductions under both 80C and Section 24 for Home loans?
Yes, you can claim both the deductions for home loans. The deduction for principal repayment and stamp duty charges under Section 80C. The deduction for interest on home loan under section 24.
About the Author
CA Mohammed S Chokhawala
Content Writer
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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