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Photo: iStock
Photo: iStock

All you need to know about tax deductions on home loan

  • Under Section 80C you can claim a deduction of 1.5 lakh against the principal repaid. However, after availing this tax break the taxpayer can’t sell the house within 5 years of possession. In that case the tax break will be reversed.

Generally, buying a house is one of the biggest purchases of a person’s life. Given the fact property prices are still not affordable to many, they avail home loan to fund their purchases. In order to provide relief to home buyers and to boost the real estate sector, the government has allowed homebuyers to avail certain tax deductions on the home loan interest as well as principal repayment. But these deductions come with certain conditions which you should be aware of.

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Let's understand how much you can claim as deduction against the principal and interest paid on home loan and the conditions attached to avail this benefit.

Deduction against principal

Under Section 80C you can claim a deduction of 1.5 lakh against the principal repaid. However, after availing this tax break the taxpayer can’t sell the house within 5 years of possession. In that case the tax break will be reversed.

Deduction on home loan interest

Under Section 24 (b) of the income tax act, the taxpayer can claim a deduction of 2 lakh against the interest paid on home loan in case of a self occupied property. The deduction is available only after the construction of the house is complete.

Additional deduction under Section 80EEA

In case you took a home loan during fiscal 2019-20 and are filing income tax returns, you may claim an additional deduction of 1.5 lakh from this year under Section 80EEA. This deduction was introduced in the Union Budget 2019 to help buyers in the affordable housing segment, and is subject to conditions.

To avail the additional deduction, the home loan must have been sanctioned between 1 April, 2019 and 31 March, 2020. The stamp duty value of the property can be up to 45 lakh. The taxpayer should be a first-time home buyer and not own any house as on the date of sanction of the loan.

This deduction is available over and above the 2 lakh deduction available under Section 24 (b)

For instance, assume that the interest paid on the home loan for the year is 3.5 lakh. You can claim 2 lakh under Section 24 (b) and 1.5 lakh under Section 80EEA.

Additional deduction under Section 80EE

Deduction under Section 80EE is available on the loan amount sanctioned between 1 April, 2016, and 31 March, 2017, for a house purchased worth 50 lakh and loan availed of up to 35 lakh. This is separate from the deduction allowed under Section 80EEA and Section 24 (b). However, if you have claimed a deduction of 50,000 under Section 80EE, you won’t be eligible to claim the deduction under section 80EEA

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