Income Tax Benefits on Home Loans

The initiatives taken by the Indian government for the growth of the real estate industry has paved a way to attract more buyers. All those buyers who purchase a property with the help of the home loan, are eligible for various tax benefits in a way to promote real estate investing making it more gainful for the buyers.

As with almost everything, buying a house also comes with a huge obligation to pay taxes. The buyers can enjoy tax deductions on the home loan principal as well as on the stamp duty registration charges under Section 80C of Income Tax Act 1961. Similarly, one can enjoy a tax deduction on the rate of interest under Section 24, Section 80EE, and Section 80EEA.

Section 80C: You can get tax benefits on all possible investment options under this section. Expenses towards Provident Funds, insurances, home loan, stamp duty registration charges for purchasing an apartment, you name it. The only catch is that you can save up to Rs.1.5 lakhs annually as the deduction.

These rules in this section are applied to all possible investments, however, most of us exhaust the limit of Rs.1.5 lakhs long before reaching the point to be capable of buying a property. There are loads of essential investments such as life insurance policy and provident fund which eats up this deduction. It is always in demand to increase the limit of Section 80C, however, you can maximize the limit by opting for a joint home loan along with your spouse who should be a co-owner as well as a co-borrower.

Section 24: This section offers the home buyers a tax benefit of up to Rs. 2 lakhs annually. This benefit is applicable only on self-occupied properties and not on properties given on rent. In such a case, the deduction is waived off.

Section 80EE: This section offers home buyers with rebates over and above the deductions offered by Section 80C and Section 24. It was introduced in the financial year 2013-15 with a limit of Rs. 1 lakh making real estate investment more lucrative. However, it was later reintroduced in the financial year 2016-17 with a revised limit of Rs. 50,000 per annum. The taxpayer can claim the rebate under Section 80EE only after exhausting the waiver provided under Section 24.

Section 80EEA: Benefits under this section states that a buyer can claim an additional Rs.1.5 lakhs above and over the tax benefits under Section 80C and Section 24. So a first time home buyer can collectively claim a benefit of Rs. 3.5 Lakhs under both Section 80EE and Section 24. To further increase the chance of getting higher deductions, buyers can jointly own a property with their co-owner and both of them can individually claim the benefits. The good news is that it is not mentioned that the property should be self-occupied or rented.