Purchasing a home is a major achievement for individuals and families in India, offering a sense of security and stability. Moreover, it presents an opportunity for tax benefits. By claiming home loan tax benefits, individuals can effectively decrease their overall tax liability, making the prospect of homeownership more financially feasible.

What is a Home Loan?

A home loan, commonly referred to as a housing loan, is a financial offering extended by banks and financial institutions to assist individuals in acquiring or building their own residential property. Typically, home loans entail a long-term commitment, necessitating regular repayments over a specified duration.

Tax Benefits on Home Loan Principal Repayment:

According to Section 80C of the Income Tax Act, 1961, individuals have the opportunity to avail tax benefits on the principal amount they repay for their home loan. The maximum deduction permitted is up to Rs. 1.5 lakh. It is essential to remember that this deduction solely applies to the principal repayment and does not include the interest component.

Tax Benefits on Home Loan Interest Payment:

• Section 24(b): Under Section 24(b) of the Income Tax Act, individuals are eligible to claim tax benefits on the interest amount paid for their home loan. For a self-occupied property, the maximum deduction permitted is up to Rs. 2 lakh per financial year. In the case of a property that is not self-occupied, there is no upper limit on the interest deduction.
• First-time homebuyers: Under Section 80EEA, the government has implemented an added provision allowing first-time homebuyers to claim an extra deduction of up to Rs. 50,000 on home loan interest. This deduction is available in addition to the existing limit of Rs. 2 lakhs, subject to specific conditions.

Tax Benefits for Joint Home Loans:

In the situation of joint home loans, where multiple individuals act as co-borrowers, each person has the opportunity to avail tax benefits on the principal repayment and interest payment proportionate to their share in the loan. This enables the fair distribution of tax benefits among the involved parties, resulting in a more advantageous arrangement.

Tax Benefits on Pre-construction Interest:

During the construction phase of properties, individuals have the opportunity to claim tax benefits on the interest paid. This benefit can be obtained through five equal installments, commencing from the year when the construction is completed.

Tax Benefits on Home Loan Processing Fee and Other Charges:

Homebuyers have the option to avail tax benefits on charges associated with their home loan, including processing fees, administrative charges, and legal fees. These charges are categorized under Section 24 of the Income Tax Act and qualify for deduction in the year they are paid.

Tax Benefits on Home Loan for Let-out Property:

In the event that you possess a property that is rented out, you are eligible to claim the complete interest paid on the home loan as a deduction, without any maximum limit. This deduction can be availed under Section 24(b) of the Income Tax Act. However, it is important to note that the rental income generated from the property is subject to taxation.

Repayment Period and Tax Benefits:

The tax benefits associated with a home loan can be claimed throughout the repayment period, and even after the complete repayment of the loan. It is crucial to maintain essential documents, such as loan statements and interest certificates, to accurately claim these benefits.

Conclusion 

Claiming home loan tax benefits eases financial obligations and saves money. Consult a tax expert for advice on specific benefits. Keep necessary documents to support claims. Explore available tax benefits when considering a home loan for financial relief and homeownership goals.