Home Loan customers can avail tax deductions under various sections of
the Income Tax Act.


Repayment of Home Loan is divided into 2 components :-



SECTION 80C : TAX BENEFIT ON HOME LOAN (PRINCIPAL AMOUNT)

It is important to note that tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been issued by the concerned authorities. No deduction is permitted under this section for repayment of principal for those years during which the property was under construction.


Service Tax is levied on under-construction houses, but there is no service tax on construction which is fully completed.


The amount paid as Repayment of Principal Amount of Home Loan by an Individual / HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs.1,50,000 (Increased to Rs. 1.5 Lakh in Budget 2014.)




SECTION 24: INCOME TAX BENEFIT ON INTEREST ON HOME LOAN

This section pertains to the Tax Benefit on Home Loan, for the payment of Interest.


As per Section 24, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase / Construction / Repair / Renewal / Reconstruction of a Residential House Property.


For a Self- Occupied property

The maximum tax deduction allowed under Section 24 for a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs).


Non Self-Occupied Property

If the home loan has been taken for a property that is not self-occupied, no maximum limit has been suggested and the taxpayer can take tax deduction of the whole interest amount under Section 24.

Note : It is important to note that if the property is not constructed from three years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from Rs. 2 Lakhs to Rs. 30,000.

DEDUCTIONS UNDER 80EE FOR FIRST TIME BUYERS

Deduction under this section is not available for any other assesse (like HUF, firm etc.).



Following conditions apply

Purchaser should be a first time buyer. i.e. he has never purchased any house before.
Value of the house should not exceed Rs. 40 lakhs.
Loan taken by an individual for the purpose of buying a house should not exceed 25 lakhs.
At the time of loan sanction, an applicant must not have any residential property in his name.

Loan for this purpose taken by an individual should be from a Financial Institution or Housing Finance Company and sanctioned between 01.04.16 to 31.03.17

Disclaimer : The above information has been provided purely for guidance and in good faith. Please consult a tax expert for the latest updates on tax benefits, before availing a home loan. The website is not liable for any damages resulting from failure to do so.