Understand the Different Sections Under Home Loan Tax Benefits India

According to reports published by the Central Board of Direct Taxes (CBDT), the number of registered individuals paying income tax has increased to 8.45 Crore in 2019, suggesting a growth rate of 15% since last year. 

Keeping in perspective the number of individuals who seek home loans every year, the Finance Ministry has announced an additional tax provision of 80 EEA in Budget 2019. Through the implementation of this and other existing home loan tax benefits, the government aims to achieve the stated objective – housing for all – and also accelerate growth in the real estate sector.

How to Claim Tax Benefits on Home Loans?

You can claim home loan tax benefits on your credit when you are filing your income tax return for a particular year. You need to list the exemptions which apply to you under specific Income Tax regulations and file it accordingly. 

You also need to attach or furnish certain documents to attest to your claims. These are – 

• Ownership papers of the concerned property. 

• The document illustrates the interest and principal component of your installments separately. 

• Documents pertinent to the completion of your property’s construction. Alternatively, you can submit documents stating the date at which you purchased your house. 

• Papers demonstrating the municipal taxes you have paid in a certain Assessment Year. 

Tax Benefits on Home Loans

A home loan is a long-term financial product. On that account, learn everything you need to know about saving tax when you take a home loan. It can considerably reduce your yearly financial obligations.

The Income Tax Department, at present, provides tax exemption on loan under three Sections – 80C, 24(b), and 80EEA. Section 80EEA was introduced post-Budget 2019 as a modification to the former Section 80EE. 

Each sectional tax benefits and its associated provisions are discussed below – 

1. Section 80C

Section 80C is a principal-based tax exemption. You can claim annual home loan tax benefits of up to Rs. 1.5 Lakh only on the principal element of your installments. Both self-occupants and landlords can claim tax benefits under this section. 

In any event, you need to possess your property for at least 5 years since the date of purchase to be eligible for tax exemption. Transfer of ownership within such period will result in a reversal of your exemption and added as an additional taxable income in the assessment Year when you sell such property. 

In case you have availed a housing credit jointly to purchase a house, know the tax benefits on a joint home loan. One such benefit is both you and your co-borrower can individually claim for tax benefits under Section 80C. However, this rule is not applicable if your property is under construction.

2. Section 24(b)

You can claim home loan tax benefits under Section 24(b) on the interest element of your installments. In case your property is self-occupied, you can claim tax exemption of up to Rs. 2 Lakh. In the event of a let-out property, you can claim an exemption on the entire interest amount you have paid in an assessment Year. 

However, if you are not occupying your property on account of employment or profession, the maximum exemption limit will become Rs. 2 Lakh per year. This section is applicable only under certain circumstances, wherein your property is constructed within 5 years from the date of availing a loan. Any discrepancy on that account would result in a reversal of your tax exemption. 

3. Section 80EEA

Section 80EEA is only applicable to first-time homebuyers who avail a home loan and purchase a house within April 2019 to March 2020. It allows an additional tax exemption of up to Rs. 1.5 Lakh on the interest amount. It is only allowed if your property value is less than or equal to Rs. 45 Lakh. You can calculate your housing credit tax exemptions using a home loan tax benefit calculator. 

The lucrative circumstances and opportunities provided by the Indian Government and other authoritative bodies facilitate you to avail home loans at standard and subsidized home loan rates.