If you are planning to take out a home loan this financial year, you should be aware of the various home loan tax benefits that you can claim. These tax benefits can help you save significant money and make owning a home more affordable.
Types of Tax Benefits for Home Loans
Here is a complete guide to home loan tax benefits in the financial year 2023-2024 that you should know:
Tax Benefits on Home Loan Interest Payment
You can claim a deduction of up to Rs. 2 lakhs under Section 24(b) of the Income Tax Act, 1961, on the interest paid on a home loan in a financial year. This deduction is available for both self-occupied and rented properties. However, you cannot claim this tax benefit if you have a home loan on a second house property.
Tax Benefits on Home Loan Principal Repayment
Under Section 80C of the Income Tax Act, 1961, you can claim a deduction of up to Rs. 1.5 lakh on the principal repayment of a home loan in a financial year. This deduction is available only for purchasing or constructing a residential property. The deduction will be reversed if you sell the property within five years of taking the loan.
Tax Benefits on Stamp Duty and Registration Charges
You can claim a deduction under Section 80C of the Income Tax Act, 1961, on stamp duty and registration charges paid at the time of purchasing a property. This deduction can be claimed within the overall limit of Rs. 1.5 lakh. However, this deduction can only be claimed in the year these expenses were incurred.
Joint Home Loan Tax Benefit
If you have taken a joint home loan with a co-borrower, you can claim a tax deduction on both the principal and interest components of the loan. The deduction can be claimed in proportion to the share of each borrower in the loan.
Tax Benefits on Pre-EMI Interest
If you have taken a loan for under-construction property, you can claim a tax deduction on the pre-EMI interest paid on the loan. This deduction can be claimed in five equal instalments, starting from the year the construction is completed.
Tax Benefits on Joint Ownership of Property
If you co-own a property with someone else, you can claim a tax deduction on the interest paid on the home loan taken for the property.
The deduction can be claimed in proportion to each owner’s share in the property.
Tax Benefits on Home Loans for Renovation
Under Section 80C of the Income Tax Act, 1961, you can claim a deduction of up to Rs. 1.5 lakh on the principal repayment of a home improvement loan. Additionally, you can claim a deduction of up to Rs. 30,000 on the interest paid on the loan.
Tax Benefits on Reverse Mortgage Loans
If you are a senior citizen and own a property, you can take a reverse mortgage loan against the property. The interest paid on the loan can be claimed as a deduction under Section 24(b) of the Income Tax Act, 1961.
Tax Benefits on Affordable Housing
Under Section 80EEA of the Income Tax Act, 1961, first-time homebuyers of affordable housing can claim a deduction of up to Rs. 1.5 lakh on the interest paid on the home loan. This deduction is in addition to the Rs. 2 lakhs deduction available under Section 24(b) of the Income Tax Act, 1961.
Takeaway
To claim the tax benefits mentioned above, you need to meet certain conditions and comply with the rules and regulations set by the Income Tax Department. Keep all necessary documents for your home loans and the property handy, such as loan statements, possession letters, and registration documents.
Use an EMI calculator for a home loan to calculate your EMI and the interest payable on your home loan. It is a simple and easy-to-use tool to help you plan your finances better.
