Income Tax Benefit on House Loan

Home loans are an easy and simple way to fund the purchase of your dream home -- you borrow the money you need to buy your home and repay this money in the form of EMIs which include a principal and an interest component. Home loans do not only make affording a home easy but they also allow borrowers to save money by way of income tax benefits on house loans. So, what are the tax benefits available to home loan borrowers when they opt for a home loan? 

The Income Tax Act allows for income tax benefit on home loan as well as on interest repayment. Under Section 80c of the Income Tax Act, borrowers can claim deductions up to a maximum of Rs.1.5 Lakh on payments made towards principal repayment. Under Section 24 of the same act, borrowers can claim income tax deduction up to a maximum of Rs.2 Lakh on payments made towards interest repayment. Over and above this, first-time home buyers can claim an additional deduction of up to Rs.50,000 if the property they have invested in is worth not more than Rs.50 Lakh and the loan amount taken is not above Rs.35 Lakh.

Home loan payers can also claim deductions on under-construction properties. In this case, the borrower can claim pre-construction interest in five equal instalments after the completion of the property. Over and above this, in the case of joint home loans, all applicants can claim deductions separately.

In conclusion, home loans come with several income tax benefits. Home loan borrowers must develop a thorough understanding of these benefits to make best use of them.