Home Loan Tax Exemption – Complete Guide to Sections 80C & 24(b)

Key Insights 

1. You can claim up to ₹2,00,000 for interest payments under Section 24(b) and up to ₹1,50,000 for principal payments under Section 80C. These deductions reduce your taxable income.
    
2. If you pay interest on a home renovation loan or a qualifying top-up loan, you can also claim a deduction under Section 24(b).
    
3. One thing you have to remember is to request your Home Loan Interest Certificate every year. This document helps you report your principal and interest payments accurately when filing your ITR-1 or ITR-2.

If you want to save more on your home by taking advantage of a home renovation loan tax exemption. This home renovation loan tax exemption can reduce your taxes and make your renovation plans more affordable and comfortable.

A home renovation loan tax exemption is like getting a government-approved discount on your renovation costs. 

You can deduct the interest you pay from your taxable income. The top-up loan on home loan tax exemption on your home loan works in a similar way, making extra borrowing a smart financial move.

I took a ₹5,00,000 home renovation loan tax exemption to remodel my kitchen and claimed the tax exemption on it. The ₹45,000 interest I paid each year was deducted from my taxable income, which helped lower the overall cost of my upgrade.

Eligibility Criteria for Home Loan Tax Exemption

Get the most from your investment. See if you qualify for key home loan tax exemptions under Sections 24 and 80EEA.

Here is the table which helps you understand the eligibility criteria for the home loan tax exemption: 
 

To maximise your tax savings, check that your property, loan amount, and approval date all meet the rules for Section 80EE.

Bonus Tip: This Home loan tax return applies to an Individual or Hindu Undivided Family (HUF) who is a Resident (but not Not Ordinarily Resident), or to a Firm (other than an LLP) that is a Resident. It is for those whose total income from business or profession is calculated on a presumptive basis under sections 44AD, 44ADA, or 44AE.

Deduction Limits Under Home Loan

Learn how to save on taxes with your property. Find out the home loan deduction limits that can help you get the most from your interest and principal payments.

Here is the table that helps you to understand the deduction limit of a home loan:
 

You can lower your taxes by using both interest deductions from Section 24(b) and principal repayments under Section 80C. This approach helps you get the most benefit.

Required Documents for Home Loan Tax Exemption

To get your tax savings, find out which documents you need for a home loan tax exemption. Having these will help you claim benefits under Sections 24, 80C, and 80EE.

Here is the list of the Primary documents required for the home loan exemption:

Home Loan Interest Certificate/Statement: Your lender gives you this document, which shows how your EMI payments are split between principal and interest for the year. You need it to claim deductions under Section 24(b) for interest and Section 80C for principal repayment.

Loan Sanction Letter: This letter from your bank or housing finance company lists the first terms and conditions of your home loan.

Loan Agreement: This is a copy of the official agreement you signed with your lender.

Ask for your Home Loan Interest Certificate every year so you can claim both principal and interest deductions correctly in your income tax return.

How to Claim Home Loan Deduction in ITR?

Save more on your property by claiming your home loan deduction on your income tax return. Find out how to do this correctly under Sections 24, 80C, and 80EEA.

Collect Loan Documents:

Collect all documents related to your housing loan, such as the loan agreement, interest certificate, and records showing how much principal and interest you paid during the year.

Determine Tax Deductions:

If you own a home, you can claim a tax deduction for the interest you pay on your housing loan under Section 24(b) of the Income Tax Act. For a self-occupied home, you can claim up to ₹2,00,000 each year. If you rent out the property, you can claim the full interest amount with no limit.

Form 16 or Interest Certificate:

If you have a salary and a home loan, your employer will give you Form 16, which shows the interest you paid on your loan during the year. If you are not salaried, your lender will give you an interest certificate with these details.

Fill ITR Form:

Choose the right ITR form for your income and situation. Most people with a salary and a home loan use ITR-1 or ITR-2.

Enter Interest Amount:

In your ITR form, find the section for claiming interest on your housing loan under Section 24(b). Enter the interest amount you paid during the year, and make sure it matches what is shown in Form 16 or your interest certificate.

Check for Pre-Construction Interest:

If you took a loan for a property that was still being built, you can claim a deduction for pre-construction interest under Section 24(b). You can claim this in five equal parts, starting from the year the property is finished.

Submit ITR:

Once you have entered all the details, check your information and submit your ITR online.

Make sure to report your interest and principal amounts correctly in the right ITR form so you can get the most property tax benefits.

Conclusion

If you understand home loan tax exemptions, you can get more value from your property. By learning the rules, using deduction limits such as Section 24(b) interest, and filing the right documents, you can save on taxes each year and grow your wealth.

FAQs

What tax deductions can I claim on a home purchase (self-funded, no bank loans involved)? 

If you purchase a home with cash, your main ongoing tax deduction will be for property taxes. Since you do not have a mortgage, you cannot deduct mortgage interest or principal payments. These deductions are key tax benefits of having a home loan.

Can I claim any exemptions on home loan interest in the new tax regime? 

Under the new tax rules, you cannot get exemptions on home loan interest for a property you live in. But you can claim the interest paid on a home loan for a property you rent out.

What are the income tax exemption and deduction rules for housing loan interest in India? 

In India, you can get tax benefits on a housing loan under different sections of the Income Tax Act, 1961, mainly through the Old Tax Regime. You can claim deductions on both the interest (Section 24(b), 80EE, 80EEA) and the principal (Section 80C) parts of your loan, as long as you meet certain conditions and limits.

What are the tax benefits of home loans in India? 

In India, if you have a home loan, you can get tax benefits on both the principal and interest payments under different sections of the Income Tax Act, 1961. These deductions are mostly available under the old tax regime and can help lower your total tax bill.

Who can claim tax deductions on housing loans?

You can claim a tax deduction on a home loan only if you own the property. If you and your spouse take a joint home loan, both of you can claim deductions on the interest paid, based on how much of the property each of you owns.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.