Ravi Singhal

Many first-time homebuyers often remain confused about the income tax benefits that they can avail on home loan after the purchase of their first residential property. If you are buying home first time, you are entitled to get income tax benefits on home loan under three sections – Section 80C, Section 24 and Section 80EEA of the Income Tax Act. These sections let you avail home loan benefits of Rs 5 lakh annually. Let’s understand with a detailed chart of the various sections.

Now, let’s consider a scenario that you have purchased a property in April 2021, property value is Rs 50 lakh and you have taken 80 per cent loan i.e. Rs 40 lakh on it from a financial institution (bank or NBFC) at interest rate of 7 per cent for 20 years.

Now your monthly EMI would be around Rs 31,000 and you have to pay a total amount of Rs 372,000 in first year, out of which Rs 2.77 lakh is interest component payment and Rs 95,000 is principal component amount. Suppose your annual earning is Rs 15 lakh annually, in that case you can claim Rs 95,000 (principal payment) deduction under 80C (remaining Rs 55,000 of 80C can be claimed from stamp duty payment, valid for only first year), Rs 200,000 under Section 24 and remaining Rs 77,000 interest amount under Section 80EEA.

So, first year you can take tax deduction benefits of Rs 4.27 lakh. Moreover, principal and interest paid components against home loan EMIs change every year, so it is suggested that check it in advance before you do your tax planning.

Tax benefits for second time home owner: If you own a property and wish to buy another then tax benefits under 80EEA cannot be claimed. In the above example, now you can claim Rs 95,000 under 80C (plus Rs 55,000 against stamp duty paid in first year) and Rs 200,000 under Section 24. If the purpose of home is investment and you want to lease it on rent, in that case you can claim full amount of interest component in Section 24, which is Rs 2.77 lakh in the above case.

If the woman member of the family invests in house: As per income tax laws, there are no specific benefits in case a woman invests in the house. She can claim all the above-mentioned benefits under income tax laws similar to man. However, some state governments have given 1-2 per cent benefit of stamp duty if she is the owner of house. In Rajasthan, if you buy a house for Rs 40 lakh, then in general case, the stamp duty (including other charges) is 8.8 per cent, which is Rs 3,52,000, but if any a female member of the family buys this house, then she has to pay 7.5 per cent stamp duty, which is Rs 3,00,000. So, there is one-time saving of Rs 52,000 if a woman buys the same house.

Tax benefits for husband-wife or joint purchase: If both husband and wife purchase the house jointly, the income tax benefit rules remain the same in that case, however, both the husband and the wife can claim tax benefits in their individual files. Maximum deductions benefits cannot cross the actual amount paid, i.e. both the husband and the wife cannot take benefit of same payment. For example, the interest component is Rs 2.77 lakh and the husband has taken a tax deduction benefit of Rs 2 lakh under Section 24, then the wife can only take the benefit of Rs 77,000 under Section 24, benefit taken against interest component can never cross Rs 2.77 lakh, which is the actual paid amount. Similarly, Rs 95,000 is paid against the principal payment, so if they want to take benefit under Section 80C, either the husband or the wife can take full benefit of Rs 95,000, or they can split it as per their tax planning, but full amount benefit cannot be taken in both accounts.

The author is Vice-Chairman at GCL Securities Limited

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