Anyone planning to avail of a home loan or anyone who already has a home loan running would know that home loans are repaid in the form of EMIs. EMI refers to equated monthly instalments. Each EMI consists of a principal component, which goes towards covering the principal component, and an interest component that covers the interest component of the loan. 

Home loan tax exemptions are available on both the interest component as well as the principal component of a home loan. Over and above this, home loan borrowers also enjoy home loan tax benefits on stamp duty and registration charges. However, one can claim these tax exemptions only when they meet certain rules and regulations. In this article, we shed light on these home loan tax exemption rules and regulations. 

Want to Avail of Home Loan Tax Benefits? Be Aware of These Home Loan Tax Benefits Rules and Regulations 

Here’s What You Must Know About Home Loan Tax Benefits Available Under Section 80C 

Section 80C of the Income Tax Act deals with home loan tax benefits available on the principal component of a home loan. Under this section of the home loan, borrowers can claim tax exemption up to a maximum of Rs.1.5 Lakh on payments made towards the principal component of a home loan. If a borrower has a second home that is self-occupied or occupied by a parent, they can claim tax exemption on the principal component of the EMIs of this loan too. 

However, the combined tax exemption under this section cannot exceed Rs.1.5 Lakh. Further, there are certain rules that home loan borrowers must keep in mind.

– Home loan tax exemptions under Section 80C of the Income Tax Act is available only for already-constructed properties. 

– If a borrower sells their home within 5 years of buying it, all tax benefits availed of under Section 80C of the Income Tax Act get reversed. 

– Borrowers can also claim home loan tax exemption on payments made towards stamp duty and registration charges under Section 80C of the Income Tax Act. However, this exemption falls within the upper limit of Rs.1.5 Lakh. Further, the borrower must claim this home loan tax exemption in the year in which they bought the house and paid the stamp duty and registration charges. In any other year, they will not be able to benefit from this income tax deduction available to home loan borrowers. 

Here’s What You Must Know About Home Loan Tax Benefits Available Under Section 24(b) 

Section 24(b) of the Income Tax Act deals with home loan tax exemptions available on the payments made towards the interest component repayment. Under this section, borrowers can claim home loan tax benefit up to a maximum Rs.2 Lakh on payments made towards the interest component repayment of a home loan. However, there are certain rules and regulations that home loan borrowers must keep in mind.

– One can claim this home loan tax exemption only if they have availed of the home loan for construction or acquisition purposes. 

– One can claim home loan tax benefits under Section 24(b) only if the construction of the home is completed within 5 years of taking the loan. In case the construction gets delayed, borrowers can claim home loan tax exemption only up to a maximum of Rs.30,000 annually. 

– In the case of rented out homes, there is no upper limit on the home loan tax exemption that can be claimed under Section 24 of Income Tax Act. However, borrowers must know that in a financial year, set-off loss under the tag ‘income from house property’ has been restricted to Rs.2 Lakh. If there is any unabsorbed loss, it can be forwarded to the next year.

Home Loan Tax Exemptions in the Case of Joint Home Loans 

In the case of a joint home loan, all the borrowers can claim tax deduction separately. As an example, if a husband and a wife have taken a joint home loan, both the partners can claim tax benefit separately under both the Section 80C and Section 24(b) of the Income Tax Act. Thus, a husband and wife can double their tax savings in each financial year by making the best use of home loan tax benefits available to home loan borrowers in the case of joint home loans. However, to be able to claim these tax benefits, both the co-borrowers must also be co-owners. If they are not co-owners, they cannot claim this home loan tax exemption. 

Home Loan Tax Benefits Available on Second Home Loans 

If a borrower has availed of a second home loan, they can claim tax deductions on both the home loans. Until a few years ago, in such cases, the second property was considered as let out and therefore, the rental income was counted as income. However, now even the second property is considered as a self-occupied property and therefore, borrowers can claim home loan tax exemptions on their second home loan as well. 

Final Words 

Majority of home loan borrowers avail of a home loan these days to fund their property purchase. Home loans make it possible for homebuyers to afford their dream home and pay for it in an easy and convenient manner. Further, home loans offer home loan tax benefits which allow borrowers to save a considerable amount of taxes each year. Various subsections of the Income Tax Act deal with income tax deductions available on various components of a home loan. 

Borrowers must not only be well aware of the various deductions available under various sections of the Income Tax Act, but they must also keep themselves updated about the home loan income tax rules and regulations if they want to maximize their savings. In this article, we have tried to cover all the important tax rules and regulations. Hope the information provided here will prove handy.