5 Important Ways to Opt for Home Loan Income Tax Benefits

All earning citizens of India must pay income tax to the government of India. The government charges tax based on the slab system, which is one of the fairest ways of calculating tax. The government of India also allows borrowers to save tax by providing exemptions under various sections of the Income Tax Act.

Home loan tax benefits are one of the few exemptions that allow borrowers to save money in the form of tax rebates for a continued period. If you have taken a housing loan in India, you can claim home loan income tax benefits each year of the entire tenor of your loan. Here we discuss 5 important ways to opt for home loan income tax benefits. 

Section 80C of the Income Tax Act 

Under Section 80C of the Income Tax Act, borrowers can claim tax exemption up to a maximum of Rs.1.5 Lakh on payments made towards principal repayment. Borrowers must know that they can claim this tax deduction only if the construction of the home against which the home loan has been taken in complete. Further, if a home loan borrower claims deduction under this section of the ITA, they cannot sell the house during the first five years of ownership. If they do so, the tax exemptions will get reverted. 

Section 24 of the Income Tax Act 

Under Section 24(b) of the Income Tax Act, borrowers can claim tax exemption up to a maximum of Rs.2 Lakh on payments made towards interest repayment. If the property is let-out or rented out, there is no limit on the deduction that one can claim on the interest portion of the loan. 

Section 80EE of the Income Tax Act 

Under section 80EE of the Income Tax Act, first-time home buyers can claim an additional Rs.50000 as tax deductions. However, to be able to claim this deduction, the borrower must meet certain requirements, the most important of which is that the value of the home loan cannot exceed Rs.35 Lakh and the value of the property to buy which the loan has been taken must not be more than Rs.50 Lakh. 

Section 80EEA 

In 2019, the Government of India provided additional relief to first-time borrowers. Under Section 80EEA of the Income Tax Act, first-time home buyers can claim an additional home loan tax benefit of up to Rs.1.5 Lakh provided they meet certain conditions. First, the home loan against which they are claiming tax exemption must have been sanctioned between April 1, 2019 and March 31, 2022. Further, the home loan borrower must have no other property on their name and the stamp duty of the home for which the loan has been taken must not exceed Rs.45 Lakh. 

Home Loan Tax Benefits on Joint Home Loans

Many times, home loan applicants add co-borrowers to enhance eligibility as well as the home loan sanction amount. In the case of joint home loans, all co-borrowers who are co-owners can claim home loan tax benefits separately under Section 80C and 24(b) of the Income Tax Act. Thus, if a husband and wife take a home loan together, both can claim tax deductions up to a maximum of Rs.1.5 Lakh under Section 80C and up to a maximum of Rs.2 Lakh under Section 24(b). Thus, in this particular case, a couple can claim a tax benefit of up to Rs.7 Lakh by way of home loan tax benefits.