What are the tax reliefs for home loan

What are the tax reliefs for home loan

Introduction: -

It is everyone dream to have a home of their own. Governments also strives hard to provide a home to everyone in the country. People wants to take home loans but afraid of the interests etc. So in order to encourage people taking home loans the government has provided various tax benefits on taking home loans.

What items are allowed as deductions?

1. Interest of the current year.
2. Pre-construction period interest.
3. Principal repayment of home loan.

Deductions available in income tax act with respect to home loans: -

• Deduction u/s 24.
• Deduction under 80C.
• Deduction U/s 80EE.

1. Deduction under section 24 (Interest on loan): -

Interest on borrowed capital (including interest on pre-construction period) is allowed as deduction under this section.
• If interest is attributable to let out property: - Interest (including interest on pre-construction period) shall be allowed as deduction without any limit.
• If it is attributable to self-occupied property: - Interest (including interest on pre-construction period) shall be allowed subject to a limit of Rs. 30,000 or Rs. 2,00,000 as the case may be.

When we can claim deduction of Rs. 2,00,000?

a. Capital is borrowed on or after 1.4.1999 for acquiring or construction of property.
b. Such construction or acquisition must be completed within 3 years from the end of year in which it is completed.
c. The loan amount has been used for such purposes only.

When we can claim deduction of Rs. 30,000?

a. If capital is borrowed for any purpose other than acquiring or construction of house. Ex: for repairs or renovation.
b. If loans are taken prior to 1.4.1999, irrespective of purpose of taking loan.

2. Deduction under section 80C (principal repayment of loan): -

• Any re-payment of principal part in loan taken towards purchase or construction of a residential property.
• Maximum deduction is Rs. 1,50,000.
• Stamp duty, registration fees, and other expenses for transfer of property can also be claimed as deduction U/s 80C even if loan is not taken.
• Deduction can be claimed only after the completion of construction of house property. Pre-construction period loan repayment is not eligible for deduction.
• If loan has been taken for renovation or repairs, then the principal repayment is not allowed under this section.

3. Deduction under section 80EE: -

Under this section, an additional deduction of Rs. 50,000 for interest on home loan can be claimed. This is in addition to the section 24 and section 80C deductions.This is a newly introduced deduction. This deduction is applicable from FY 2016-17 only.
This deduction is available to individuals only. This deduction can be claimed for every year up to 50,000 per year.
So now you can claim a deduction of Rs. 2,50,000 with regard to interest on home loan under both sections.

Conditions for claiming deduction under section 80EE: -

1. The value of property purchased must be less than or equal to 50lakhs.
2. Loan taken must be less than or equal to 35 lakhs.
3. This is the first house purchased.
4. Loan has been sanctioned in between 1.4.2016 to 31.3.2017.

Conclusion: -
If you can satisfy both the condition laid under sec.24 and sec.80EE, you claim deduction under both. But first utilize sec.24 and then come to sec.80EE. Because if you get any loss under income from house property due to utilization of sec.24, it can be carried forwarded.
All the above deductions are per person not per property. So, If any loan has been taken jointly, then each can claim deductions separately by dividing the interest & principal amount they have paid.