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Home Loan Tax Benefit

Income Tax Benefit on Home Loan

Last Updated 23rd May 2022

  • Under Section 80C, you can claim deduction upto ₹ 1.50 Lakh for the principal repayment done in the financial year.
  • Home loan borrowers can get deductions upto ₹ 2 Lakh for the accrual and payment of interest on home loans under Section 24B.
  • Under Section 80EEA, you can claim tax benefits for upto ₹ 1.50 Lakh for the interest payment of a home loan availed during the financial year.
  • You are also eligible to get an additional deduction of up to ₹ 50,000 for the interest payment of the home loan if you have availed home loan for an amount less than ₹ 35 Lakh and the value of the property is within ₹ 25 Lakh .
  • In the case of a joint home loan, each borrower can claim avail deduction of principal repayment (section 80C) and interest payment (section 24b) if they are also the co-owners of the property.
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Housing Loan Tax Benefit

Home Loan Tax Benefit on First Home – Self Occupied
  • You can claim a maximum of ₹ 1.50 Lakh on actual principal repaid under section 80C.
  • Tax deduction upto ₹ 2 Lakh if you complete the construction within 5 years.
  • Tax exemption of ₹ 30,000 if the construction exceeds 5 years.
  • Additional deduction of ₹ 1.50 Lakh for purchase of affordable houses of up to ₹ 45 Lakh.
  • Home Loan Tax Benefit on First Home – Rented/ Vacant (deemed to be let out property)
  • You can claim upto ₹ 1.50 Lakh on the principal amount for tax deduction under Section 80 C if the property owner stays in a different city for work.
  • Exemption on interest is capped at a lower of two, a) ₹ 2 Lakh or b) actual interest paid for all properties owned by a taxpayer.
  • Home Loan Tax Benefit on Second Home or Additional Property
  • Exemption on interest is capped at a lower of two, a) ₹ 2,00,000 or b) actual interest paid for all properties owned by a taxpayer.
  • Home Loan Tax Benefit on Under Construction Property
  • You can claim interest paid on your home loan in equal parts in five financial years post-completion or handing over of property within the overall annual limit of ₹ 2 Lakh.

Current Housing Loan Tax Exemption

You can claim home loan tax exemption on home loan interest under various conditions as mentioned below:

  • You can claim a maximum home loan interest tax benefit of ₹ 2 Lakh in case your property is self-occupied.
  • In case you have rented out the property, then you can claim the actual amount of interest accrued on your home loan without any limit.
  • In case of a joint home loan where the co-borrowers are also co-owners, the deduction is available up to the maximum limit for each one.
  • The maximum limit of ₹ 2 Lakh is applicable in case of the under-construction property only if the construction is complete within 5 years from the financial year in which the loan is availed. If not, then the applicable deduction is limited to ₹ 30,000.

Section of the Income Tax Act that Provides Tax Rebate on Home Loan

SectionsTax Benefit ComponentDeduction Limit
Sec 80 CPrincipal Repayment₹ 1.50 Lakh
Sec 24Interest Repayment ₹ 2 Lakh
Sec 80 EEAdditional Tax Benefit on Interest Payment for First Time Borrower₹ 50,000

How to Claim Home Loan Tax Benefit Under Section 80C?

You can claim income tax benefit on home loan under Section 80 C by following the steps as mentioned below:

  • The tax benefit can be claimed only while filing the ITR.
  • At the time of entering the details in your ITR form, ensure you have entered the correct values in the various income heads as applicable to you.
  • Next, in the section of deduction under section 80C calculate the tax deduction you want to claim.
  • Since section 80C includes various other deductions as well like, LIC premium, contribution to the provident fund. You need to calculate how much of all the deductions available under the section you can claim.

Home Loan Tax Benefit under Section 80EE

To claim an additional income tax exemption on housing loan, you need to fulfill the following eligibility criteria:

  • Home loan sanctioned between 1st April 2016 to 31st March 2017.
  • The borrower should not own any house on the date of loan sanction.
  • The deduction available is subject to a maximum limit of ₹ 50,000.
  • You can claim tax deduction under Section 80EE of Income Tax Act on the home loan interest.
  • The deduction is available for a home loan of ₹ 35,00,000 and below. Also, the value of the property should not exceed ₹ 5 Lakh.

Tax Benefit under Section 24B

As per section 24B of the Income Tax Act, you can claim deduction on the home loan interest availed either for the purpose of constructing a new house or for the purchase of a residential property.

The deduction on home loan interest is allowed on an accrual basis. Thus, you can claim a home loan deduction for the interest amount for the year, whether you have paid till now or not.

Income Tax Benefit on Home Loan for Owning Second property

If you have more than one property, and both are self-occupied, then only one will be considered as self-occupied for the purpose of calculating tax benefit on home loan and income from house property.

The tax benefit available for self-occupied property for interest on a home loan is a maximum of ₹ 2 Lakh under section 24(b). For a lent out property or deemed to be lent out, the deduction is available for actual value without any limit.

Tax Benefit on Home Loan under Construction Property

For the property that is still under construction, you can claim the following tax rebate on home loan:

  • Deduction for principal repayment for up to ₹ 1.50 Lakh.
  • The deduction for interest amount can be claimed in five equal installments after the construction is completed within 5 years from the financial year in which you have availed the home loan.

If the construction of property does not get completed within 5 years from the year in which the loan is availed, then the deduction available for the interest on the home loan will be available only upto ₹ 30,000.

What are the Tax deductions on Joint Home Loan?

In the case of a joint home loan, each borrower can claim a tax deduction if they are also the co-owners of the property. One can claim upto ₹ 2 Lakh and ₹ 1.50 Lakh on Interest Payment and principal amount, respectively.

HRA and Tax Exemptions

If you have availed a home loan and are also staying in a rented house you can claim both; tax benefit on home loan and House Rent Allowance deduction. However, you can claim the HRA benefit only if you live in a rented house. You can claim HRA deduction on lower of the following three:

  • 50% of your salary for metro cities and 40% in the case of non-metro cities.
  • Actual HRA received.
  • The actual rent paid during the year minus 10% of your salary.

How To Claim Tax Benefit on Home Loan?

You can claim tax benefit on your home loan by following the steps as mentioned below:

  • Calculate the tax deduction of interest on a home loan you have to claim.
  • Next, you can submit your home loan interest certificate to your employer, so that the deduction can be adjusted with TDS.
  • Otherwise, you can file the ITR yourself and submit the certificate as required.
  • For self-employed, submitting the certificate is not required. However, you should keep it with you as it can be asked by the IT department.


Is home loan a good idea to save tax?

Yes, a home loan is a good option to save tax. You can claim a total tax deduction of upto ₹ 7 Lakh on both principal and interest payments.

What is the tax deduction for home loan interest?

You can claim tax benefits upto ₹ 2 Lakh on home loan interest subject to the actual interest paid on a home loan. Additionally, home loan buyers can get other benefits if they are first time home buyers.

How much tax benefit can you claim on home loan?

You can claim a maximum tax benefit of Rs. 7 Lakhs, including the principal and interest amount of your home loan.

Can I claim both 80EE and section 24?

Yes, you can claim a tax benefit under both section 24 and section 80EE in a single year. First time home buyers can claim tax deduction upto ₹ 50,000 under Section 80EEof the Income Tax Act 1961. The amount can be claimed over and beyond the deduction of Section 24 which is ₹ 2 Lakh.

Which is better HRA or home loan?

Tax benefits on HRA or home loan is dependent on factors such as rent amount, location of residence, home loan and rate of interest etc. However, in most of the cases the tax benefits are significantly higher on home loans.

How is tax exemption on home loans calculated?

You can calculate the tax exemption on home loans by using an online home loan tax benefit calculator. Simply enter values like loan amount, principal amount and interest paid, property type and you can know the amount of home loan deduction. Calculating and determining tax benefits on home loans is efficient for planning expenses.

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