Repayment of Home Loan has 2 components:-
- Repayment of the Principal Amount
- Repayment of the Interest on Home Loan
Section 80C: Tax benefit on Home Loan (Principal Amount)
The amount paid as repayment of Principal Amount of Home Loan by an Individual/HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs. 1,50,000. This tax deduction is the total of the deduction allowed under Section 80C and includes amount invested in PPF Account, Tax Saving Fixed Deposits, Equity Oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme etc. This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made. The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan. You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.
However, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded. No deduction would be allowed under this section for repayment of principal for those years during which the property was under construction.
Section 24: Income Tax Benefit on Interest on Home Loan
Tax Benefit on Home Loan for payment of Interest is allowed as a deduction under Section 24 of the Income Tax Act. As per Section 24, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.
The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs to Rs. 2 Lakhs). In case the property for which the Home Loan has been taken is not self-occupied, no maximum limithas been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.
Please Note: In case a property has not been self-occupied by the owner by reason of the fact owing to his employment, business or profession carried on at any other place, he has to reside at that other place not belonging to him, then the amount of tax deduction allowed under Section 24 shall be Rs. 2 Lakhs only.
It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis.
Section 80EE: Income Tax Benefit on Interest on Home Loan (First Time Buyers)
Section 80EE which provides for additional Deduction of Rs. 50,000 for Interest on Home Loan. This incentive would be over and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.
This Deduction of Section 80EE would be applicable only in the following cases:-
- This deduction would be allowed only if the value of the property purchased is less than Rs. 50 Lakhs and the value of loan taken is less than Rs. 35 Lakhs.
- The loan should be sanctioned between 1st April 2016 and 31st March 2017.
- The benefit of this deduction would be available till the time the repayment of the loan continues.
- This Deduction would be available from Financial Year 2016-17 onwards.
Refernces:-
- Tax Benefit on Home Loan: Section 24, 80EE & 80C
- Decoding Tax Benefit on Home Loan (Section 24, 80EE & 80C)
- How to fill Housing Loan Interest in ITR 1
- How to show home loan interest for self occupied house in ITR 1 tax return