Income Tax Benefit on Home Loan FY 2024-25 (Assessment Year 2025-26)

Highlights of Income Tax Deductions Available on Home Loan
Section 80C	Up to Rs. 1.5 lakh on principal repayment (including stamp duty and registration fee)
Section 24(b)	Up to Rs. 2 lakh on home loan interest paid
Section 80EEA*	Up to Rs 1.5 lakh on home loan interest paid (for borrowers who availed home loans between April 1, 2019 and March 31, 2022)

*Note: To boost affordable housing segment, the government had also introduced an additional tax deduction of up to Rs. 1.5 lakh for first-time homebuyers on the home loan interest component under Section 80EEA. This deduction was over and above the tax deduction available under Section 24(b). However, it is no longer available for fresh home loan applicants.

Tax Deduction on the Home Loan Principal Repayment under Section 80C

As per Section 80C of the Income Tax Act,

• You can claim a deduction of up to Rs. 1.5 lakh on the amount paid as the repayment of the home loan principal. This may include stamp duty and registration fees, but can be claimed once in the same year in which they incurred
• The home loan should have been taken for the purchase or construction of a new house.

Note: If you sell the house property, within five years from the end of the year in which it was bought, all benefits that were availed as per the provisions of Section 80C will get reversed and will be counted in your income at the year in which you sell such property.

Tax Deduction on Home Loan Interest Payment under Section 24(b)

As per Section 24(b) of the Income Tax Act,

• You can claim a tax deduction of up to Rs. 2 lakh on home loan interest paid. This deduction is applicable in case of self-occupied as well as vacant residential properties
• In case of let-out or rented residential properties, there no cap on tax deduction
• This deduction is applicable on:
  • home loans taken on or after 01-04-1999
  • properties whose acquisition or construction is completed within 5 years from the end of the financial year in which the housing loan was taken
• The deduction for interest on borrowed capital shall be limited to Rs. 30,000, if:
  • The home loan is taken before 01-04-1999 for buying or constructing a house property;
  • The home loan is availed on or after 01-04-1999 for reconstructing, repairing or renewing of a house property;
  • The home loan is taken on or after 01-04-1999 but construction of house property is not completed within five years

Additional Deduction on Home Loan Interest for Affordable Housing under Section 80EEA

Section 80EEA was introduced in Union Budget 2019 to give a boost to affordable housing segment. Under this provision, first-time homebuyers can claim tax deduction of up to Rs. 1.5 lakh on the interest paid on affordable housing loans. However, tax deduction under Section 80EEA is no longer available to home loans sanctioned on and after 1 April 2022 as the benefits offered under this section were for housing loans sanctioned till 31 March 2022.

To claim the benefit, the following conditions should be met:

• Housing loan should be taken between the period April 1, 2019 and March 31, 2022
• The stamp duty value of residential house property should not be more than Rs. 45 lakh
• You should not own any residential house property on the date of sanction of loan
• You should not be eligible to claim deduction under Section 80EE of the Income Tax Act

Note: Many banks and HFCs offer special home loans schemes aimed at promoting affordable housing. Some of these home loan schemes include Axis Bank Asha Home Loan, ICICI Bank Pratham Home Loan, PNB HFL Roshni Home Loan, Indiabulls Rural Home Loans, Aadhar Housing Finance Home Loan, YES KHUSHI Home Loan and GIC Affordable Home Loan

Tax Deductions on Joint Home Loans

Applying for a home loan jointly not only enhances your home loan eligibility but also the tax benefits. Individuals taking a home loan jointly can avail home loan tax benefits individually. This implies that if two individuals have applied for a joint home loan, each can claim tax benefit of up to Rs. 1.5 lakh and Rs. 2 lakh on their home loan principal and interest, respectively. Considering the co-applicants are buying house for the first time, they will get an additional tax deduction of up to Rs. 1.5 lakh, giving them a combined tax benefit of total Rs. 10 lakh, provided they meet the related prerequisites. The same goes if the borrowers want to claim additional tax benefit under Section 80EEA of the Income Tax Act.

Another benefit of adding a co-applicant is that it increases your eligibility for a higher loan amount as in such cases lenders consider the repayment capacity and credit scores of all co-applicants. And in cases where the co-applicant is a female family member, lenders such as HDFC Bank, Union Bank of India, SBI and Bank of India offer an interest rate concession of up to 0.05% to women borrowers. Therefore, adding an earning female member of the family as a co-applicant can help you get home loan at lower interest rates.

Tax Deductions on Second Home Loan

With effect from Assessment Year 2020-21, the tax deduction on home loan interest shall be allowed in respect of two self-occupied residential properties. However, the aggregate amount of deduction under this provision shall remain the same i.e., Rs. 30,000 or Rs. 2 lakh, as the case may be, otherwise the deduction is limited to Rs. 30,000.

FAQs on Home Loan Tax Benefits

What is the maximum amount of tax deductible on a home loan?

Ans. Individuals can claim tax deduction of up to Rs 2 lakh on home loan interest paid and up to Rs 1.5 lakh on the principal repayment. Thus, up to Rs 3.5 lakh can be claimed as tax deduction in a financial year.

Can I claim tax benefits on the principal repaid on a housing loan?

Ans. Yes, you can claim tax deduction of up to Rs 1.5 lakh on home loan principal repayment each financial year.

What documents are required for home loan tax deduction?

Ans. The list of documents required to claim tax deduction on home loan includes provisional interest certificate and joint declaration (in case of joint home loans).

Who is eligible to claim tax exemption on home loan?

Ans. While tax exemption and tax deduction are often used interchangeably, they have different meanings. Tax exemption is offered on certain types of income exempted from taxation while tax deductions are offered on specified expenses or investments that can be claimed to reduce your taxable income. The Income Tax Act does not allow any tax exemptions on home loan payments. What it offers is tax deduction under Section 80C and 24(b) on home loan principal repayment and interest payment made during a financial year.

Can my spouse claim an income tax deduction if we buy a house jointly?

Ans. Yes, you and your spouse can claim deductions separately up to the limit of Rs. 3.5 lakh each in a financial year, thereby, doubling the tax benefit. However, to claim this benefit, your spouse should be co-owner of the property.