Boost Your Savings: Claim These Home Loan Tax Deductions and Save Big!
Boost Your Savings: Claim These Home Loan Tax Deductions and Save Big!
Buying a home is a major financial goal for many individuals, and the Indian government offers various tax benefits on home loans to make homeownership more accessible. These benefits are designed to reduce the financial burden of repaying a home loan and are governed by different sections of the Income Tax Act, 1961.
This article delves into the major tax deductions available, how to declare a home loan in your income tax returns, and how the new tax regime affects these deductions.
1. Home Loan Tax Benefit Calculator
A Home Loan Tax Benefit Calculator is a useful online tool that helps you estimate how much you can save in taxes by claiming deductions on your home loan. These calculators require inputs such as:
- Loan amount
- Annual interest paid
- Annual principal repaid
- Gross annual income
- Applicable tax regime (old or new)
- Property ownership status (self-occupied or rented)
Benefits of Using the Calculator
- Quickly estimates total tax savings
- Compares benefits under old and new tax regimes
- Helps in effective financial planning
Popular financial platforms like BankBazaar, HDFC, and ClearTax offer such calculators.
2. Tax Deduction on Home Loan Interest – Section 24(b)
Section 24(b) of the Income Tax Act allows you to claim a deduction on the interest paid on your home loan.
Key Features:
- Maximum Deduction: ₹2,00,000 per annum (for a self-occupied property)
- No Upper Limit: If the property is let-out or deemed to be let-out, the entire interest paid can be claimed as a deduction (however, set-off of loss from house property is capped at ₹2,00,000 against other heads).
- Eligibility: Loan must be taken for the purchase, construction, repair, renewal, or reconstruction of a residential property.
Important Conditions:
- The construction of the property should be completed within 5 years from the end of the financial year in which the loan was taken. Else, the deduction limit reduces to ₹30,000.
- Deduction is allowed on an accrual basis (interest due, not necessarily paid).
3. How to Declare Home Loan in Income Tax Return (ITR)
When filing your Income Tax Return, you must disclose details of your home loan under the ‘Income from House Property’ section.
Steps to Declare a Home Loan:
- Select ITR Form: Most commonly ITR-1 (for single house ownership and salaried individuals) or ITR-2.
- Enter Property Details:
- Self-occupied / Let-out / Deemed to be let-out
- Report Income or Loss:
- For self-occupied: Report ‘Nil’ or negative income due to interest deduction.
- For let-out: Report actual rental income minus municipal taxes.
- Claim Deductions:
- Interest on loan (Section 24): Up to ₹2 lakh for self-occupied, actual for let-out
- Principal repayment (Section 80C): Up to ₹1.5 lakh
- Stamp duty & registration (Section 80C): One-time benefit, within the overall ₹1.5 lakh limit
- Upload Form 16 (if salaried):
- Ensure home loan interest is reflected
- Attach Home Loan Certificate:
- Issued by the lender, detailing principal and interest breakdown
4. Home Loan Interest Tax Benefit
Summary of Benefits:
| Section | Nature of Deduction | Maximum Limit | Applicability |
| 24(b) | Interest on home loan | ₹2,00,000 | Self-occupied |
| 80C | Principal repayment | ₹1,50,000 | Self-occupied/Let-out |
| 80EE | Additional interest | ₹50,000 | First-time buyers only |
| 80EEA | Additional interest | ₹1,50,000 | Affordable housing, extended till FY 2021-22 only |
80EE vs. 80EEA
| Criteria | Section 80EE | Section 80EEA |
| Loan sanctioned between | April 1, 2016 - March 31, 2017 | April 1, 2019 - March 31, 2022 |
| Max deduction | ₹50,000 | ₹1,50,000 |
| Conditions | Loan amount < ₹35 lakh; property value < ₹50 lakh | Stamp duty value < ₹45 lakh |
5. Tax Benefit on Home Loan in New Tax Regime
With the introduction of the new tax regime under Section 115BAC (applicable from FY 2020-21 onwards), taxpayers now have the option to forgo most exemptions and deductions in exchange for lower slab rates.
Key Point:
- No tax benefits on home loan (Section 24(b) and 80C) are allowed if you opt for the new tax regime.
Who Should Choose the New Regime?
- Individuals who do not have significant deductions (like home loan, HRA, etc.) may benefit from the lower tax rates.
Comparison Example:
| Particulars | Old Regime | New Regime |
| Gross income | ₹10,00,000 | ₹10,00,000 |
| Deductions (80C + 24(b)) | ₹3,50,000 | ₹0 |
| Taxable Income | ₹6,50,000 | ₹10,00,000 |
| Tax Payable | ~₹45,000 | ~₹75,000 |
Verdict: If you have a home loan and can claim the full interest + principal deduction, the old tax regime may offer greater benefits.
Read More: CJI Sanjiv Khanna Declines Post-Retirement Government Roles, Emphasizes Continued Legal Engagement
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
