Home Loan Tax Benefits

As per Section 80C of the Income Tax Act,

Note: If you sell the house property, within five years from the end of the year in which it was bought, all benefits that were availed as per the provisions of Section 80C will get reversed and will be counted in your income at the year in which you sell such property.

As per Section 24(b) of the Income Tax Act,

Section 80EEA was introduced in Union Budget 2019 to give a boost to affordable housing segment. Under this provision, first-time homebuyers can claim tax deduction of up to Rs. 1.5 lakh on the interest paid on affordable housing loans. However, tax deduction under Section 80EEA is no longer available to home loans sanctioned on and after 1 April 2022 as the benefits offered under this section were for housing loans sanctioned till 31 March 2022.

To claim the benefit, the following conditions should be met:

Note: Many banks and HFCs offer special home loans schemes aimed at promoting affordable housing. Some of these home loan schemes include Axis Bank Asha Home Loan, ICICI Bank Pratham Home Loan, PNB HFL Roshni Home Loan, Indiabulls Rural Home Loans, Aadhar Housing Finance Home Loan, YES KHUSHI Home Loan and GIC Affordable Home Loan

Applying for a home loan jointly not only enhances your home loan eligibility but also the tax benefits. Individuals taking a home loan jointly can avail home loan tax benefits individually. This implies that if two individuals have applied for a joint home loan, each can claim tax benefit of up to Rs. 1.5 lakh and Rs. 2 lakh on their home loan principal and interest, respectively. Considering the co-applicants are buying house for the first time, they will get an additional tax deduction of up to Rs. 1.5 lakh, giving them a combined tax benefit of total Rs. 10 lakh, provided they meet the related prerequisites. The same goes if the borrowers want to claim additional tax benefit under Section 80EEA of the Income Tax Act.

Another benefit of adding a co-applicant is that it increases your eligibility for a higher loan amount as in such cases lenders consider the repayment capacity and credit scores of all co-applicants. And in cases where the co-applicant is a female family member, lenders such as HDFC Bank, Union Bank of India, SBI and Bank of India offer an interest rate concession of up to 0.05% to women borrowers. Therefore, adding an earning female member of the family as a co-applicant can help you get home loan at lower interest rates.

With effect from Assessment Year 2020-21, the tax deduction on home loan interest shall be allowed in respect of two self-occupied residential properties. However, the aggregate amount of deduction under this provision shall remain the same i.e., Rs. 30,000 or Rs. 2 lakh, as the case may be, otherwise the deduction is limited to Rs. 30,000.