The Tax Benefits of Taking a Home Loan

By LODHA

Owning a house is a dream for almost everyone. And to help people realise this dream, the state and central Governments in India have launched several housing schemes, such as the Pradhan Mantri Awaas Yojana (PMAY), NTR Urban Housing Scheme, and the Maharashtra Housing and Area Development Authority (MHADA) scheme.

Apart from making your homebuying process easier and more affordable, a home loan by Lodha can help you reduce your income tax outgo. The Government of India has allowed several tax exemptions on home loans under various sections of the Income Tax Act of 1961. Continue reading to know the tax benefits of a home loan in detail.

1. Tax benefits on the interest component of a home loan

A home loan has two components - the principal component and the interest component. The Equated Monthly Instalments or EMIs that you pay for your home loan include the repayment of both these components.

Under section 24 of the Income Tax Act, you can claim the amount paid by you as interest on your home loan as tax deductions. The maximum tax benefits available under this rule in a given financial year is Rs. 2 lakhs.

It needs to be noted that the aforementioned tax benefits on the interest component of a home loan are available for self-occupied houses. Even if you've taken home loans for two houses with the second one being occupied by your spouse, parents, or offspring, the total tax deduction that you can claim under section 24 should not exceed Rs. 2 lakhs in a financial year.

2. Tax benefits in the principal component of a home loan

Apart from tax deductions on the interest component of a home loan, you can also enjoy tax benefits on the repayment of the principal component of your home loan. As per section 80C of the Income Tax Act, the amount repaid as home loan principal during a financial year can be claimed as tax exemptions. The maximum tax benefits available under this section is Rs. 1.5 lakhs per year.

However, the tax benefits of home loans under this section are applicable with certain conditions. Firstly, the property should be held by the taxpayer for at least five years and secondly, the house should be self-occupied by the taxpayer.

Apart from the repayment of the principal amount, you can also claim one-time tax deductions under section 80C for the payment of stamp duty and registration charges for the registration of your house. However, the maximum tax deductions that you claim under this section cannot exceed Rs. 1.5 lakhs.

3. Tax benefits for first-time home buyers

Under section 80EE of the Income Tax Act, you can avail of additional tax benefits of up to Rs. 50,000 by taking a home loan for buying your first house in India. However, to claim tax benefits under this section, the following four conditions have to be satisfied:

- Your home loan amount should not exceed Rs. 35 lakhs
- The value of your house should not be more than Rs. 50 lakhs
- You should not be owning a housing property anywhere in India on the date of loan sanction
- You should have taken your home loan in the Financial Year 2016-17

4. Additional tax benefits on buying an affordable house

If you have taken a home loan to purchase a house under the affordable housing category, you can claim an additional tax deduction of up to Rs. 1.5 lakhs under section 80EEA of the Income Tax Act. This deduction is available on the repayment of the interest component of your home loan over and above the deduction limit of Rs. 2 lakhs under section 24.

Thus, you can claim a maximum deduction of Rs. 3.5 lakhs in a financial year against the repayment of the interest component of your home loan taken for buying a house under the affordable housing category.

How to claim tax benefits on a home loan?

You can apply for a Lodha home loan to buy any housing property in the Mumbai Metropolitan Region (MMR) by the Lodha Group. You can also claim tax benefits on your home loan in a few simple steps mentioned below:

- Step 1 - Make sure that your housing property is self-occupied. Also, you should be the owner or co-owner of the property
- Step 2 - Calculate the total amount that you can claim as tax deductions on home loans under various sections of the Income Tax Act
- Step 3 - Claim the tax deductions evaluated in Step 2 while filing your Income Tax Returns (ITRs). You may also need to submit the required documents for claiming tax deductions on your home loan

Income tax benefits on home loans can result in enhanced savings and lower your overall homebuying costs. If you're uncertain of how to calculate tax benefits on your home loan, you can use an online home loan tax benefits calculator.

If you want to buy an affordable house in Mumbai, you can avail of a home loan by Lodha at a flat 6.99% interest rate and enjoy lower EMIs up to 2024*. To calculate your Lodha home loan EMIs, click here.

*Limited time offer. T&C apply