Here’s Everything you need to know about Tax Benefit on Home Loan

Along with attractive rates of interest, home loans have become beneficial funding options for house purchases due to various other reasons, one of which is tax benefit on home loans. Interestingly, individuals who purchased their houses through home loans and are making repayments of such advances can avail home loan tax benefit.

Below is a detailed explanation of the applicable income tax benefits on housing loans, eligible deductions and necessary insights related to them.

1. Deduction for interest payment

Section 24B of the Income Tax Act, 1961, allows an annual deduction of up to Rs.2 lakh for the interest component of your total home loan repayment for the year. Such deduction would be accounted for under the taxable income calculation to find the tax liability you need to pay. You can keep this in mind when using an income tax calculator.

2. Deduction for principal repayment

Section 80C of the Act also allows for a deduction of up to Rs.1.5 lakh towards your home loan principal repayment. Such deduction can be claimed every year until the complete repayment of your loan principal.

3. Additional deduction for affordable housing

Plus, Section 80 EEA carries a provision allowing an additional deduction of up to Rs.1.5 lakh on home loan repayment if the house property purchased qualifies for affordable housing and costs under Rs.45 lakh.

Read Also: Know How to Claim Home Loan Tax Benefits

The Income Tax Act carries a separate provision towards deduction for principal repayment if the house purchased is under construction.