Income Tax Benefits on Home Loans under sections 80C, 24B & 80EE

Date : 8-May,2020|Read: 5 mins

Income Tax Benefits from Home Loans

A home of one's own is a dream held by millions in our country. Apart from being a shelter, a house is a bankable asset that can reap multiplied income either through selling or renting it. As it is a worthwhile and lucrative investment, it is bound taxable by the department of revenue. However, the government has initiated several income tax benefits, tax reforms and tax exemptions throughout the years to promote the "Housing for all by 2022" scheme to bring in affordable housing in India.

Even in this age To attract home buyers, the government has provided income tax benefits based on ownership as well as based on loans availed. These are as follows :

Income Tax Benefits qualified through obtaining Home Loans:

Section 80 c
  • Deduction under section 80c is up to Rs 1.5 Lakhs P.A after the completion of construction and receiving the Completion Certificate.
  • Renovation or extension of homes is eligible for tax deductions as well.
Section 24 b
  • Repayment of interest of a home loan for construction, renovation or purchase of a self-occupied home is eligible for tax deductions up to Rs 2 Lakhs P.A.
  • For Let-out Homes (not self-occupied), tax deductions will have no limits.
Section 80 EE:
  • Income tax rebate on Home Loan for first-time buyers has an additional Rs 50,000 P.A apart from the Rs 1.5 Lakhs benefit from section 80C and Rs 2 Lakhs benefit from section 24B.

Section 80 C

This section covers the repayment of the principal amount of Home Loans. You can only avail up to Rs 1. 5 Lakhs and that too if you have completed the construction of the property. You will are not to sell off the house for 5 years if you are to avail the same and if you do sell the property then the deduction under section 80c will be reversed and added to your annual income tax. Stamp Duties and Registration fee can be claimed back under this section.

Section 24B

Repayment of interest of a home loan for construction, renovation or purchase of a self-occupied home is eligible for tax deductions up to Rs 2 Lakhs P.A.When it comes to Let-out Homes (not self-occupied), tax deductions have NO LIMITS meaning they can be claimed for the entire interest amount.

From the Financial Year 2016-2017, properties exceeding construction time of five years from the end of the financial year in which the home loan was availed can now avail only Rs 30,000 which was Rs 2 lakhs previously.

Section 80 EE

This section caters to the first time home buyers who have taken a loan amount below 35 lakhs and between 1 April 2016 and 31 March 2017. You can also avail of an interest deduction up to Rs 50,000 a year.

The Income Tax Rebate on Home loans for the financial year 2019-2020

  • The maximum deduction amount can claim for a self-occupied property has increased to 2 Lakhs.
  • A co-owner can claim up to the maximum amount he paid as interest for the homes which have been rented out.
  • Only if the construction is completed within 5 years, will the deduction claim for 2 Lakh is applicable otherwise the maximum income tax exemption limit will be up to Rs 30,000.

Benefits and Tax Deductions based on Ownership

Based on homeownership, there are many provisions for tax exemptions if the property or the house is held under joint ownership.

  • Joint Ownership of Self Occupied House

If the House is under joint ownership, both the parties can qualify for tax exemption up to 2 lakh per year under the Income Tax Act of 1961.

  • Rental or Let Out Benefits.

If the house is let out or given out for rent and the rental income is divided between the owners, they can qualify for the tax exemption up to 2 lakhs under the property loss slab.

  • Section 54 - Capital Gains Tax Exemption

The sale of a house and the capital gains derived from it is taxable, however, if the individual buys another property in the same or stipulated time, then the invested amount can be reduced from the capital gains. If the property is under joint ownership, then both parties can benefit from the same.

Often home buyers miss out on income tax benefits because of the lack of information. The amount an individual can save is very huge, it has ample knowledge of income tax procedures. However one should be careful when filing for tax returns and tax reductions as the wrong information can severely affect our tax returns.

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