Home loan tax benefits allow taxpayers to claim deductions on both principal and interest payments which help to reduce overall tax liability, making home loans more tax-efficient way to finance property purchases.
Impact under New Tax Regime
By default if you are falling under new tax regime for FY 2023-24 then, there is no tax benefit when you are taking home loan for a self occupied house property.
Benefits under New Tax Regime
Only in rented house property (let out), interest deduction is allowed.
Impact under Old Tax Regime
When loan is taken for the purchase or construction of house, then it must be completed within 5 years.
Tax Benefits under Old Tax Regime
Section 24
You can claim deduction on interest paid upto Rs. 2 lakh in a year.
[It can be claim for self occupied property and no limit on the interest for let out property]
Section 80C
The maximum limit to claim deduction u/s 80C is Rs. 1.5 lakh which includes home loan principal, stamp duty, insurance premium, PF contribution etc.
Section 80EE
An additional deduction on interest upto Rs. 50,000 can be claim u/s 80EE but with certain conditions:
- Home loan taken must be between the periods April 1, 2016 to March 31, 2017.
- Amount of loan is less than Rs. 35 lakh.
- Property value must not exceed Rs. 50 lakh.
Section 80EEA
An additional deduction on interest apart from section 24 can be claim in section 80EEA. The limit is upto Rs. 1.5 lakh. The conditions are:
- Loan taken must be from April 1, 2019 to March 31, 2022.
- Stamp value of property must not exceed Rs. 45 lakh.
- For first time home buyers.
Important Update
As per budget 2023, home loan cannot be the part of acquisition cost for capital gain calculation when you sell property.
For Example
| Particulars | Before Budget 2023 | After Budget 2023 |
| Sale value of property | 30,00,000 | 30,00,000 |
| Purchase value | (10,00,000) | (10,00,000) |
| Interest Paid for loan | (50,000) | – |
| Capital gain | 19,50,000 | 20,00,000 |
Joint Home Loan Benefits
When there are two or more individuals and taken a joint home loan, then each co-applicant who is also a co-owner of the property can claim tax deductions on both interest and principal payments.
- Each co-applicant can claim u/s 24b upto Rs. 2 lakh annually on interest paid.
- Each co-applicant can also claim up to Rs. 1.5 lakh on principal repayment under Section 80C.
- If the co-applicants are purchasing their first home, they are also eligible for an additional deduction of up to Rs. 1.5 lakh under Section 80EEA.
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FAQs
Yes, you can claim tax benefit on only for second self occupied home loan property.
Yes, you can claim both the benefits.
Under section 24 of the Income Tax Act, a deduction can be claim on home loan interest upto ₹2 lakh. However, if the house construction is not completed within 5 years, the deduction is limited to ₹30,000.