How to claim income tax benefits on home loans in FY23?

A Home Loan is a financial source for your dream come true, along with making a better deal for tax savers. A home loan provides a number of benefits upon repayment through tax deductions under the Income Tax Act of 1961. A home loan repayment consists of two parts: the principal amount and the interest paid on the amount borrowed. Under Section 80C and 24(b) of the Income Tax Act of 1961, you are eligible to get tax advantages on each of these categories. When it comes to tax preparation for a financial year, it's critical to be knowledgeable of all the home loan tax benefits. Based on an exclusive discussion with several experts, here are some ways that borrowers might reduce their tax obligations on home loans in FY23.

1. CA Anamika Rana, Finance Content Creator says, "If you have taken a home loan to purchase or construct a house, you may be eligible for a tax deduction on the interest paid on your home loan. 

Section 24(b) of the Income Tax Act allows for a deduction of up to Rs.2 lakh on the interest paid towards your home loan in a financial year.

To avail of this deduction, you need to make sure that you have completed the construction or acquisition of the property before claiming the deduction. 

Additionally, the property should be self-occupied or let out on rent to be eligible for the deduction.

It's also important to note that if you have jointly taken a home loan with someone else, both of you can claim a deduction of up to Rs.2 lakh each on the interest paid.

To claim the deduction, you need to submit the relevant documents to your employer or the income tax department, as the case may be. These documents may include the loan agreement, interest certificate, and other relevant documents.

So, make sure to explore this option if you have taken a home loan for your property."

2. Deepak Bhati, Chartered Accountant and Co-founder of DigiWhistle says, "In 2023, buying a new home is on trend, despite various interest rate hikes by the RBI. So, if you are planning to book a new house or flat - here are some tax benefits you can avail on your home loan that many people don’t know about.

Repayment of the principal amount: The repayment of the principal amount of a home loan is eligible for a deduction of up to Rs. 1.5 lakh per annum under Section 80C.

Stamp duty and registration charges: The expenses incurred on stamp duty and registration charges for the purchase of a house are also eligible for deduction under Section 80C.

Pre-construction interest: Interest paid during the construction period of the property is eligible for a tax deduction in five equal installments starting from the year in which construction is completed.

It is important to note that these deductions are available only if the property is self-occupied."

3. Nidhi Nagar, Finance Content Creator says, "If you have bought your first home, Here is how you can get extra tax deduction on your home loan interest. 

As we all know under section 24 b we can get deduction of up to 2 lakh on home loan interest but you can also claim up to ₹1,50,000 deduction under Section 80EEA. 

This section was introduced to extend the benefits allowed under Section 80EE which is 1 lakh. 

80EEA is for low cost housing so your cost of house should be 45 lakhs or less than 45. 

You can claim this deduction if your taken loan was sanctioned during the period 1st April 2019 and 31st March 2022.

Fir example: let’s say Mr. Sharma bought a home worth 45 lakhs in March 2020, and paying 4,00,000 interest yearly

Now he can claim a ₹200,000 deduction for home loan interest under Section 24. And as the house's stamp value is ₹45 lakh, he is eligible for a ₹1,50,000 deduction under Section 80EEA. So Sharma is eligible for a total deduction of ₹3,50,000 under Sections 80EEA and 24.."

4. Finance Content Creator - Tarun Malhotra says, "There are several ways to save tax on home loan but one I notice people are least aware of is joint home loan, which, when claimed with a spouse or another person can increase overall tax benefits. 

Firstly, interest rates on joint home loans are comparatively much lower than that of individual ones. 

Additionally, all co-borrowers can claim a deduction on the principal amount and interest payment of the home loan under Section 80C upto 1.5lakh (each) and Section 24(b) upto 2 lakh (each) of the Income Tax Act, respectively. 

Lastly, if the loan is taken for the purchase of an under-construction property, co-borrowers can claim a deduction on the interest paid during the construction period. 

It is always advisable to seek advice from a tax expert to understand the nuances of tax savings on any typical home loan."

5. Finance Content Creator - Adarsh Gupta says, "The real estate sector in India is one of the fastest-growing industries in the world. However, buying real estate on a home loan has become more expensive due to various factors such as government policies, inflation rates, and interest rates.

Fortunately, you can still avail of tax benefits on home loans under section 80EE of the Income Tax Act. This section offers additional tax benefits to first-time homebuyers. 

As per this provision, a deduction of up to Rs. 50,000 can be claimed on the interest paid towards a home loan for first-time home buyers. To claim this deduction, the property's value should not exceed Rs. 50 lakhs and the loan amount should not exceed Rs. 35 lakhs. 

The deduction is over and above the limit of Rs. 2 lakhs available under Section 24(b) of the Income Tax Act. This tax benefit can be claimed for a maximum of 5 consecutive years, starting from the year of the loan repayment."