Tax benefits on home loans

A loan that helps scores of Indians realise their dream to have a house of their own is a home loan. The additional benefit that one gets when borrowing money to buy a house includes income tax exemptions, which is available on both the principal repayment and the interest on the loan. The Budget this year also included an additional tax benefit for first time home buyers with an additional exemption of Rs.50,000 for interest on home loan under Section 80EE. This benefit is on home loans where the value of the house is less than Rs.50 lakh and the loan raised is less than Rs.35 lakh. However, the loan should be sanctioned between April 1, 2016 and March 31, 2017.

Section 24:

Tax benefit on home loan for payment of interest is allowed as a deduction under Section 24 of the Income Tax Act. The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs.2 lakh. In case the property for which the home loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.

Section 80C:

The amount paid as repayment of principal of home loan by an Individual or HUF is allowed as tax deduction under Section 80C up to Rs.1.5 lakh in a financial year. This tax deduction is available on payment basis irrespective of the year for which the payment has been made. The amount paid as stamp duty and registration is also allowed as tax deduction even if the assessee has not taken the loan. However, no deduction would be allowed under this section for repayment of principal for those years during which the property was under construction.

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