July end makes our heart skips a beat. Income Tax terror and stress on how to get maximum tax deductions fills up our mind. But if you are a home buyer, you can extract huge tax.

In the world of Home Buyers, whether it’s a high or middle income buyer, everyone is opting for Home loans. Whatever may the income be, no one wants to spend a large bucket of gold in one go. So choosing home loan becomes the safest option.

But many of you may not know that Home loans not only allow you to prevent flushing a large amount of money but also save you from a well known terror known as Income Tax.

Let us bring you the benefits of home loan right from the table of Experts:

Home loan Tax Benefits

The repayment of Home Loan is categorized in two sections:

  1. Principal amount Repayment
  2. Interest amount Repayment

Principal amount Repayment: Section 80C Tax benefit

You can extract tax relief on home loan at the repayment of the principal amount under Section 80C of the Indian Income Tax Act. According to which, deduction up to Rs 1.5 Lakh is allowed. The deduction under section 80C is on the basis of payment and not the year of payment done.

One major point to remember is that the tax deduction is valid on post construction completion. Hence, you need to submit the certification for complete construction to take this tax benefit. If you are paying the principal repayment for an under construction property, you will not be eligible for any tax deduction even if you were paying the entire EMI during that time period.

Interest amount Repayment: Section 24 Tax benefit

According to Section 24 Act, you can extract tax deduction on the interest amount paid for the home loan. Maximum tax benefit of Rs 2 Lakh is allowed on the self-occupied property. In case you are dealing with non – self occupied property, the deduction will be done on the overall interest.

Important point to remember is that the tax benefit will be conducted on an accrual basis. Also, the tax deduction will fall to Rs. 30,000, in case the construction does not complete within 3 years.

Section 80C and Section 24: The difference

Tax deduction for Interest Principal
Tax deduction base Accrual Basis Paid Basis
Tax deduction allowed Self occupied: Rs. 2 lakh

Non self Occupied: No limit

Rs. 1.5 Lakh
Loan purpose Purchase/Construction/Repair/Renewal/Reconstruction of residential property Purchase/Construction of new house property
Claiming Eligibility Purchase/Construction should be done within 3 years NIL
Property sale restriction NIL Tax deduction claimed would be reversed if sold within 5 years


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