Home loans offer several tax benefits. Unfortunately, not many home loan borrowers are aware of these benefits even when an individual can claim several tax deductions and save a considerable amount in taxes each year. In this article, we look at home loan tax benefits available to home loan borrowers. 

1. Home Loan Tax Benefits Discussed Under Section 80C 

Under Section 80C of the Income Tax Act, home loan borrowers can claim home loan tax benefits up to a maximum of Rs.1.5 Lakh on payments they had made towards the repayment of the interest component of their home loan during the given financial year. However, homebuyers must remember that if they sell a property within five years of buying it, all the tax benefits they had claimed under Section 80C get reversed.

2. Home Loan Tax Benefits Under Section 24b 

Section 24b deals with the interest component of one’s home loan. As per this section, home loan borrowers can claim tax deductions on payments made towards the repayment of the interest component of their home loan up to a maximum of Rs.2 Lakh in any given financial year. However, one can claim this tax benefit only in case of properties for which full possession has already been obtained. In the case of properties that are still under construction, borrowers can claim tax deduction on the interest component of the property but only after construction on the complete has been completed. Further, home loan borrowers can claim tax benefits on pre-possession interest in five equal instalments spread over five years after a homebuyer has obtained full possession of their property. 

3. Home Loan Tax Benefits Under Section 80EE 

Over and above the tax benefits mentioned under Section 24b, home loan borrowers can claim additional tax benefits up to a maximum of Rs.50,000 provided they meet the following conditions: 

1. The home buyer must have availed of a home loan between April 1, 2016 and March 31, 2017.

2. The value of the property bought with the loan money must not exceed Rs.50 Lakh and the value of the loan itself must not exceed Rs.35 Lakh. 

3. The home buyer applying for benefits under this section can avail of these benefits only if they had no other property in their name at the time of availing of the loan.

4. Home Loan Tax Benefits Under Section 80EEA 

Home loan borrowers can claim interest deduction up to a maximum of Rs.1.5 Lakh under Section 80EEA of the Income Tax Act. Tax savings offered under this section are over and above the tax savings on the interest component of a home loan mentioned under Section 24b of the Income Tax Act. However, one can claim tax deduction under Section 80EEA only if they meet the following conditions: 

1. The homebuyer must have availed of a loan between April 1, 2019 and March 31, 2021. 

2. The stamp value of the property bought with the loan money must not exceed Rs.45 Lakh. 

3. The taxpayer claiming deduction under this section must not have any other property under their name.

4. They must also not be eligible to claim tax deduction under Section 80EE.

A home loan is an excellent tax-saving instrument. However, if you do not understand the various home loan tax benefits and how to claim them, do not worry. Most home loan borrowers don’t. Simply hire an expert to help you file your taxes at the end of the financial year so that you can save the maximum that you can.

Also have a look at: Maximize Tax Savings Tips in FY 2023-24