Income tax rebate on home loan

To make house ownership a reality for many residents, the government has established various incentives for anyone looking to purchase a property. Tax breaks on the mortgage loan are one of the most appealing aspects of house ownership.

You may accumulate tax benefits through a series of astute investments over time. Among these are tax deductions associated with purchasing a property, an investment that pays dividends over a loan’s lifetime. According to Section 80C, a mortgage interest deduction is allowed. Numerous tax breaks are available for those who use home loans to finance the purchase of their primary residence. 

 

Income tax rebate on home loan: Details

Getting a home loan means borrowing a sizable sum of money from a financial institution so you may put down a down payment on the house of your dreams. The percentage of the purchase price that the lender will cover is contingent on the loan program and financing guidelines but is often between 75% and 90%.

Depending on how far along the building process the property is, the remaining loan balance may be disbursed in stages after the first down payment. If just a portion of a loan is disbursed, the lending institution will only collect interest on that portion. Once a loan has been completely released, monthly payments must be made. The EMI is a payment that covers both the principal and interest on the loan.

 

Income tax rebate on home loan: Tax deductions

Homebuyers in India may deduct up to Rs 1.5 lakhs in principal payments under Section 80C and up to Rs 2 million in interest payments under Section 24 from their taxable income. Under Section 80 EEA, the government has allowed first-time homebuyers to deduct an extra Rs 1.5 lakhs from their taxable income if they pay interest on a house loan. This is all part of an effort to stimulate the affordable housing market.

 

Tax deductions for a mortgage loan (FY 2022-23)

The tax breaks available to you under the relevant provisions of the Income Tax Act, 1961, are listed in the table below.

Income Tax Act	Maximum Deductible Amount
Section 24	Rs 2 lakh per annum
Section 80C	Rs 1.5 lakh per annum

 

Repayment of a home loan’s principal is tax-deductible under Section 80C

Up to  Rs 1.5 lakh may be deducted annually as principal payments on a property loan. Stamp duty and registration costs fall into this category, although they may only be recouped once, in the year they were paid. 

The mortgage money was supposed to go toward a brand-new home, not remodelling the current one. All deductions under Section 80C will be nullified and included in your taxable income for the year of sale if you sell your home within the first five years after the end of the year in which you purchased it.

 

Section 24 allows a tax deduction for mortgage interest

The interest you pay on your mortgage may be deducted from your taxes up to a maximum of Rs 2 lakh. Both owner-occupied and unoccupied homes qualify for this deduction. A homeowner may deduct an unlimited amount from their taxable income if they rent out their primary residence. Housing loans originated on or after 01-04-1999 are eligible for this deduction, as are homes whose purchase or construction is completed within five years of the end of the fiscal year in which the housing loan originated.

Interest paid on home loans taken before 01-04-1999 to finance the purchase or construction of a primary residence or on home loans taken on or after 01-04-1999 for rehabilitating, modernising, or replacing a primary residence are subject to Rs 30,000 caps on the amount that can be deducted as a home loan interest expense.

 

Subsidised mortgage interest deduction expansion under Section 80 EEA

It was to bolster the affordable housing market that Section 80 EEA was included in the Union Budget for 2019. The interest paid on affordable housing loans is tax deductible up to Rs 1.5 lakhs for first-time purchasers under this provision. 

The following requirements must be satisfied before the benefit may be requested:

• Borrowing for a home is permitted between April 1, 2019, and March 31, 2020.
• Home stamp duty values should not exceed Rs 45 lakhs.
• On the day your loan is approved, you must not have any residential real estate in your name.
• No deduction under Section 80EE of the Income Tax Act should be available to you.

There are several home loan programs available from financial institutions and HFCs that are designed to make homeownership more accessible to those with lower incomes. Names like GIC Housing Finance, Axis Bank, Indiabulls, HFFC, Aditya Birla Housing Finance, Godrej Housing Finance, Indian Bank, Canara Bank, LIC Housing Finance, and PNB Housing Finance are just a few of the many financial institutions that provide this kind of funding.

 

Income tax rebate on home loan: Joint mortgage deductions

Borrowers may deduct up to Rs 2 lakhs in interest and Rs 1.5 lakh in principle from their house loan, but only if they are co-owners of the property.

 

Getting a tax break for a joint home loan

When two people take out a house loan together, they may split the tax benefits: interest paid on loan is deductible up to Rs 2 lakhs under Section 24(b), and the repayment of principal is deductible up to Rs 1.5 lakhs under Section 80C. This doubles the number of possible savings compared to a mortgage loan with just one application. 

However, both applicants must be joint owners of the home and responsible for the EMI payments. If both you and your spouse have stable employment, you might consider applying for a home loan together. The total loan amount and tax advantages are more tremendous with a home loan taken out as a joint venture. As a result, under Section 80C, the couple may deduct up to Rs 3 lakhs from the initial investment. You may deduct the maximum amount of interest from your taxes as part of your home loan’s Section 24 expansion from Rs 2 lakhs to Rs 4 lakhs.

 

Income tax rebate on home loan: Perks of tax-advantaged home loans with second homes

Second homeowners may take advantage of tax breaks on interest that become due this year under the existing law. Every penny of interest accrued is yours to keep. It has been recommended that a borrower’s second primary residence also qualify as a primary residence to deduct mortgage interest and property taxes.

 

FAQs

If we take out a house loan, could we qualify for a tax break?

Each borrower may deduct up to Rs 2 lakhs in house loan interest under Section 24(b) and up to Rs 1.5 lakhs in principal repayment under Section 80C if they take out a home loan together.

How much of a tax break can you get on a mortgage, if any?

The highest allowable tax deduction for principal payments made on a home loan is Rs 1.5 lakhs. Registration fees and stamp duties may be claimed here as well.

To what extent are Section 24 and Section 80EE dissimilar?

In terms of deductibility, Section 24(b) allows for a deduction of up to Rs 2 lakhs for a primary residence and the full deductibility of interest on a rental property. But once you have deducted as much as you may under Section 24(b), you can deduct another Rs 50,000 under Section 80EE (b).