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Know All About Tax Benefits On Home Loans Under Different Sections

One of the major investments of a person’s life is owning a home. They use home loans to finance their investments, considering the fact that house rates are still not reasonable for many. The Income Tax Department has therefore offered some primary benefits for the use of home loans in an attempt to attract homebuyers. Tax benefits are permitted by means of income deductions towards principal repayment and interest on a home loan, transfer fees or all other charges incurred for the buying of an estate. 

Repayments of the principal amount

Reimbursements rendered for the key portion of the housing loan lent for the acquisition/construction of the house property qualify for a deduction under Section 80C’s cap of Rs 1.5 lakh. But, if the estate on which the exemption is sought is sold within a lock-in period of 5 years from the date of purchase, this deduction will be revoked. In addition, any cost incurred in consideration of stamp duty, registration fees or any other fees specifically related to the transfer of properties shall be deducted in the form of a deduction below the total cap of Rs 1.5 lakh set out in section 80C. And in the year of actual expenditure this deduction is  permissible.

Tax benefits on home loan interest rates

Pursuant to Section 24(b) of the Income Tax Act, in the category of self property, the taxpayer can seek a deduction of Rs 2 lakh against the interest paid on the home loan. Only after the building of the house is successful is the deduction applicable.

Tax benefits under Section 80EE

As of FY 2017-18, Section 80EE was implemented as an additional tax benefit of up to Rs 50,000 against the interest payable on the loan taken for the benefit of purchasing a home, subject to the following circumstances:

  • During the financial year 2016-17, the loan has been approved by a financial institution.
  • The amount of loan given is less than Rs 35 Lakhs.
  • The residential property value shall not surpass Rs 50 Lakhs,
  • The applicant is the first holder of the property of the estate as at the date of the loan authorization.
  • If any exemption is claimed pursuant to this clause, no deduction of that interest is permissible under any other section.
  • Before the repayment of the loan, the interest benefit referred to in section 80EE is eligible, subject to fulfillment of the above circumstances. The interest deduction appears to be accessible under the terms and conditions specified in section 80EE for a person whose loan has been approved.

Under Section 80EEA

From FY 2019-20, Section 80EEA was further adopted to expand and improve the advantages provided for low-cost housing under Section 80EE. An additional exemption of up to Rs 1,50,000 for interest payable on a home loan taken under the following conditions is allowed under this section:

  • A resident individual must be the assessee.
  • Between 1 April 2019 and 31 March 21, the loan will be accepted by the financial institution or the housing finance corporation for a one-year extension authorized past 31 March 2020 in Budget 2020.
  • The residential property’s valuation shall not surpass Rs 45 Lakhs.
  • The assessee is the first holder of the estate of the house as of the loan sanction date.
  • Under section 80EE, a person should not be able to claim an interest deduction.

Note: Additionally, on 12 November, Union Finance Minister Nirmala Sitharaman declared income tax breaks for builders and home-buyers to raise the country’s appetite for residential housing. The first-time owners of properties costing up to Rs 2 crore will get income tax benefit of up to 20 per cent and this will be valid till June 30, 2021. The Finance minister declared that the difference between the circular rate (stamp duty price) and the price of the agreement (purchase price) for the primary sale of housing properties of up to Rs 2 crore will be multiplied from 10% to 20%. On Thursday (November 12), Union Finance Minister Nirmala Sitharaman declared income tax exemption for builders and home-buyers to raise the country’s appetite for real estate.

Raman Sonu
Raman Sonu
Raman is an Author, writer and blogger. He has knowledge and understanding of finance, stock, and market research. He has done Bcom in Finance. Please contact me at raman.sonu2020@gmail.com for any feedback or concern.
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