Maximising Housing Loan Tax Benefits: A Guide For Maximum Savings

A home loan not only gives you your dream home but also comes with attractive tax benefits under the Income Tax Act, India. With such deductions, homeowners can reduce their taxable income, leading to sizable savings. Here's how you can maximise your housing loan tax benefits.

Tax Benefits under Section 80C

Section 80C of the Income Tax Act provides a deduction of up to Rs 1.5 lakh per year on the principal repayment of your home loan. This deduction is available to individual taxpayers or Hindu Undivided Families (HUFs) who have taken a loan for the purchase, construction, or renovation of a house. The deduction is applicable on the repayment of the principal amount of the loan.

Tax benefits under section 24(b)

Under Section 24(b), for a home loan, a deduction up to Rs 2 lakh can be claimed every year from the interest paid on it. This benefit is only when the property is self-occupied and taken for purchasing or building a residential property. But if the property is let out, then the whole amount of interest paid on the home loan is deductible with no upper limit.

Additional Deductions for First Homebuyers

The government also provides additional benefits to first-time homebuyers under Section 80EE. First-time buyers can claim an additional deduction of up to Rs 50,000 on the interest paid on home loans. This deduction is available if the loan amount does not exceed Rs 35 lakh, and the value of the property is within Rs 50 lakh. To qualify for this benefit, the individual must not have owned any residential property before.

Pre-Construction Interest Tax Benefits

In case you have borrowed for construction purposes, the interest payable on a home loan in such cases can also be set off. Total interest for the construction period can be deducted equally over five years from the year in which construction is completed or the house is obtained.

How to Claim

In order to claim these tax benefits, you need to follow the following:

1. Interest and Principal Certificates: Obtain the certificate for both interest and principal paid as recorded with the lending authority during the financial year.

2. File Income Tax Return (ITR): Once you file your ITR, you need to attach some of the details regarding the home loan, which include information for the principal and interest you paid. Make sure all necessary claims are made under sections 80C and Section 24(b).

By understanding and using these housing loan tax benefits, you can cut down on a massive chunk of your tax liability and make the most out of your property investment.