Income Tax Benefit on Home Loans

Income Tax Benefit on Home Loans

How much & How to get Income Tax Benefit on Home Loans?

In the below post we have tried to give you an overview of Income Tax Benefits on Home Loans, how much benefit can be obtained & how to get these benefits. Taking a Home Loan will not only fulfil your cherished dream of owning your own house but it will also save you taxes.

Here are the various types of home loan tax benefits one can avail for taking a home loan.

1. Section 80C of Income Tax Act

  • Type of deduction: Deduction on Principal Repayment
  • Maximum deduction: Rs 1,50,000

2. Section 24 of Income Tax Act

  • Type of deduction: Deduction on Interest amount paid
  • Maximum deduction: Rs 2,00,000

3. Section 80EE of Income Tax Act

  • Type of deduction: Additional interest paid benefit for first time home buyers
  • Maximum deduction: Rs 50,000

4. Section 80EEA of Income Tax Act

  • Type of deduction: Additional benefit for first time home buyers if the property value is below 45 lakhs
  • Maximum deduction: Rs 1,50,000

Deductions under Income Tax Act Section 80C and Section 24 are available to all the home loan borrowers.
However, to avail deduction under Section 80 EE and Section 80EEA certain conditions need to be met. Let us look at these deductions in detail.

 

Tax Benefit under Section 80EE of Income Tax Act

Income Tax Act allows a tax deduction on interest amount paid. Over and above the Rs.2 lakh deduction allowed under section 24, the act allows a further deduction of Rs. 50,000 for first time home buyers. The additional deduction is allowed on the interest paid during the year. However, there are certain conditions which need to be met to avail this additional deduction allowed under section 80EE.

  1. The Stamp value of the house should be Rs. 50 lakhs or lower.
  2. The loan sanctioned for buying the house should be Rs. 35 lakhs or lower.
  3. The most important condition is during the time of sanction of loan the borrower should be owning no other property.
  4. In effect the property for which Section 80EE is claimed should be the first property of the borrower.
  5. The Final condition is loan must be sanctioned between 1 Apr 2016 and 31 Mar 2017.

 

Tax Benefit under Section 80EEA of Income Tax Act

The government has a target of “Housing for all”. To achieve this target the government extended the benefits under low cost housing. As seen above the existing provision of Section 80 EE allowed a deduction of Rs. 50,000 only. A new section 80EEA was inserted to allow for a deduction of Rs. 1.5 lakhs. This deduction is in addition to the deduction of Rs 2 lakhs for interest payments available under Section 24 of the Income Tax Act. However, there are certain conditions which need to be met to avail this additional deduction allowed under section 80EEA.

  1. The Stamp value of the house should be Rs 45 lakhs or lower.
  2. During the time of sanction of loan the borrower should be owning no other property. In effect the property for which Section 80EEA is claimed should be the first property of the borrower.
  3. Carpet area of the house should be less than 60 square meters (approx. 645 sq ft) in metro cities and 90 square meters (approx. 968 sq ft) in non metro towns and cities.

 

So along with Section 24 a borrower can claim a maximum deduction of Rs. 3.5 lakhs towards interest payment on Home Loans. A co-borrower is also eligible for 3.5 lakhs of deduction provided the co-borrower is also a co-owner. So in all Maximum Income Tax Benefit on Home Loans is 7 lakhs.

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