Financial constraints hold back many individuals in our country from owning a home. Hence, they rely on home loans as the most practical method to own a property. The Indian government recognises the importance of homeownership and offers various incentives, including tax benefits on home loans.
One of the main advantages of a home loan is its potential to significantly reduce your tax burden. The Income Tax Act 1961 provides several sections under which you, as a home loan borrower, can claim tax deductions, making your homeownership journey more affordable.
Understanding these tax benefits is essential to maximizing your financial advantage. In the following sections, we’ll look closely at the specific tax deductions available on home loans in India and explore how they can help you save money in the long run.
Understanding Various Home Loan Tax Deductions in India
1. Principal Repayment Deduction
Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to INR 1.5 lakh annually on the principal portion of your home loan repayments. This deduction can help reduce your taxable income significantly.
To claim this deduction, you must not sell the property within five years of purchasing it. Additionally, expenses like stamp duty and registration fees incurred during the purchase can also be deducted under this section.
2. Interest Repayment Deduction
For self-occupied properties, you can claim a tax deduction of up to INR 2 lakh annually on the interest paid on your home loan under Section 24(b) of the Income Tax Act. However, any interest exceeding this limit cannot be carried forward to the following year.
This deduction is available only for properties that are completed within five years of purchase. If the construction takes longer, the deduction is limited to INR 30,000.
3. Deduction for First-Time Home Buyers
If you are a first-time home buyer, you can claim a tax deduction on the interest paid on your home loan under Section 80EEA. To qualify for this deduction, you must meet specific requirements related to the loan amount and property value.
Suppose you have purchased a property in the affordable housing category. In that case, you can claim an additional tax deduction of up to INR 1.5 lakh annually on the interest paid on your home loan under Section 80EEA. This is in addition to the deduction allowed under Section 24(b).
Unlocking Tax Benefits with Home Loans
Taking advantage of the tax benefits available on home loans can be a smart financial decision, helping you save money while simultaneously achieving your homeownership goals. To maximise your tax savings on a home loan, consider opting for a joint home loan, as this allows each borrower to claim separate deductions for both interest and principal repayment.
When selecting a loan, it is wise to carefully consider factors such as home loan interest rates, tenure, and repayment options. Comparing offers from different lenders can help you find the most suitable deal.
IndusInd Bank offers a wide range of home loan products with attractive features like:
- IBL Offerings service
- Fast & easy processing of loan application
- Zero hidden charges
- Balance transfer facility
- Simplified documentation
- Funding up to 30 years of tenure
Apply for a home loan online with IndusInd Bank to take advantage of significant tax savings and a hassle-free, personalised experience.
Also read: How To Get a Home Equity Loan If You’re Unemployed
