If you have taken a home loan, you can avail of rebates on your income tax liability under various sections of the Income Tax Act in India. An income tax rebate is allowed on both, the principal and the interest, throughout the repayment tenure of your home loan under the following sections:
- Section 80C
- Section 24
- Section 80EEA
- Section 80EE
In this guide, we will discuss the terms and conditions to claim the rebates allowed under these four sections.
Section 80C
Under Section 80C, you can claim a tax deduction of up to Rs 1.50 lakh annually, on payment of home loan principal.
Section 80C: Conditions
Applicable on: Property construction and property purchase.
Can be claimed against: Self-occupied, rented and deemed-to-be-rented properties.
Construction time limit: If you have taken a loan to build a home, the construction work must be completed within five years of taking the home loan.
Sale: The house must not be sold within five years of possession. If sold, deductions claimed would be added back to the income and taxed accordingly in the assessment year of the sale.
Basis of claim: Deductions under Section 80C can only be claimed on the actual amount paid annually.
Section 24
Under Section 24, you can claim a tax deduction of up to Rs 2 lakh annually, on payment of home loan interest.
Section 24: Conditions
Available for: Property construction and property purchase.
Can be claimed against: Self-occupied, rented and deemed-to-be-rented properties.
Construction time limit: If you have taken a loan to build a home, the construction work must be completed within five years of taking the home loan.
The deduction is capped at Rs 30,000 if the house is not constructed within five years of taking the loan. This period starts from the end of the financial year in which the loan is borrowed. The deduction can be claimed from the year in which the construction is completed.
Timeline: The loan should have been taken after April 1, 1999.
Interest certificate: An interest certificate from the bank is mandatory to claim the benefit.
Deduction basis: Deductions under Section 24 are offered on accruals, i.e., the interest is calculated for each year separately and a rebate can be claimed, even if no actual payment is made.
Section 80EEA
Under Section 80EEA, a first-time home buyer in India can claim an additional tax deduction of up to Rs 1.50 lakh annually, over and above the limit provided under Section 24, on payment of home loan interest.
Section 80EEA: Conditions
Available for: First-time buyers.
Timeline: The loan should have been taken between April 1, 2019 and March 31, 2022.
No claim under 80EE: Only those buyers who are not claiming deductions under Section 80EE can claim benefits under Section 80EEA.
Property value: Should not exceed Rs 45 lakh.
Carpet area: 60 sq mt in metro cities and 90 sq mt in other cities.
Loan source: Should be taken from a bank or a housing finance company; not friends and family members.
Section 80EE
Under Section 80EE, you can claim a tax deduction of up to Rs 50,000 annually, on the payment of home loan interest. This deduction is offered only to first-time home buyers in India and is applicable over and above the Rs 2-lakh deduction provided under Section 24.
Section 80EE was introduced in the financial year 2013-15 for two years, to make home ownership lucrative for first-time home buyers.
Section 80EE: Conditions
Loan period covered: April 1, 2016 to March 31, 2017.
Buyer type: First-time home.buyer.
Property value: Must not exceed Rs 50 lakh; loan value should be up to Rs 35 lakh.
Loan source: Financial institution.
Applicability of Section 24: You can claim the rebate under Section 80EE only after exhausting the waiver provided under Section 24.
Interest statement: You must submit an interest certificate issued by the bank, to claim the deduction.
FAQs
Under how many sections of the income tax law rebate is offered to home loan borrowers?
Rebate is offered to a home loan borrower in India under four sections – Section 80C, Section 24, Section 80EEA and Section 80EE.
How much rebate can a home buyer claim in a year?
If one ticks all the boxes, a borrower can claim up to Rs 5 lakh in tax deductions.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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