Home Loan Tax Benefits: Deductions & Claim Process

Introduction

A home loan not only helps you buy your dream home but also offers substantial tax benefits under the Income Tax Act, 1961. Borrowers can claim deductions on both the principal and interest components of their EMIs—under Section 80C and Section 24(b), respectively. These deductions lower your taxable income, providing financial relief while supporting your long-term savings and repayment goals. For example, Section 80C allows a deduction of up to ₹1.5 lakh annually on principal repayment. Understanding these tax provisions can help you optimize savings and manage your home loan more efficiently. This article explains the key tax benefits available on home loans.

Overview of Home Loan Tax Benefits

Home loan borrowers in India can avail of several tax benefits under the Income Tax Act, helping reduce their overall tax liability. These benefits are primarily available under Sections 24, 80C, 80EE, and 80EEA, covering both the interest and principal components of the loan, as well as other related expenses such as stamp duty.

Deduction on Interest Paid – Section 24

Eligibility: Applies if the loan is taken for purchasing or constructing a residential property.
Limit:
- Self-occupied property: Deduction up to ₹2 lakh per annum on the interest paid.
- Let-out property: No upper limit on the interest deduction.
Construction Period Rule: If construction is not completed within 5 years from the end of the financial year in which the loan was sanctioned, the deduction for self-occupied property is restricted to ₹30,000 per year

Pre-Construction Interest Deduction

Eligibility: Applies to under-construction properties.
Claim: Interest paid before completion/acquisition of the property can be claimed in 5 equal annual instalments starting from the year of completion.
Limit: Included within the overall ₹2 lakh limit under Section 24 for self-occupied properties

Deduction on Principal Repayment – Section 80C

Limit: Up to ₹1.5 lakh per annum.
Conditions:
- Property must not be sold within 5 years from the date of possession.
- If sold earlier, all claimed deductions will be reversed and added to the income of the year of sale

Deduction for Stamp Duty & Registration Charges – Section 80C

Eligibility: Allowed in the year the expenses are incurred.
Limit: Part of the ₹1.5 lakh limit under Section 80C

Joint Home Loan Benefits

When a loan is taken jointly:
- Each co-borrower can claim up to:
  - ₹2 lakh under Section 24 for interest.
  - ₹1.5 lakh under Section 80C for principal repayment.
Condition: Co-borrowers must also be co-owners of the property

Tax Benefits on Second Home Loan

Same deductions apply as for the first home loan.
Self-Occupation: As per the 2019 budget, even a second property can be treated as self-occupied if it is not let out, eliminating notional rental income for tax purposes

First-Time Homebuyer Deductions

a. Section 80EE

Deduction: Up to ₹50,000 per annum on interest paid.
Conditions:
- Loan ≤ ₹35 lakh, Property value ≤ ₹50 lakh.
- Loan sanctioned between 1st April 2016 and 31st March 2017.
- Must be a first-time homebuyer.

b. Section 80EEA

Deduction: Up to ₹1.5 lakh per annum on interest.
Conditions:
- Stamp duty value ≤ ₹45 lakh.
- Loan sanctioned between 1st April 2019 and 31st March 2022.
- First-time homebuyer.
- Cannot claim this deduction if already availing 80EE benefits

Summary Table of Home Loan Tax Benefits

Section	Benefit Type	Maximum Deduction	Key Conditions
24(b)	Interest on home loan	₹2 lakh (self-occupied)	No limit for let-out; ₹30,000 if construction delayed
24(b)	Pre-construction interest	5 annual instalments	Post completion/acquisition; within ₹2 lakh cap
80C	Principal repayment	₹1.5 lakh	Property must be held for 5 years
80C	Stamp duty & registration	Within ₹1.5 lakh	Only claimable in year incurred
24(b) & 80C	Joint home loan	₹2 lakh + ₹1.5 lakh per co-borrower	Co-ownership required
24(b) & 80C	Second home loan	Same as first home	Second home can be treated as self-occupied
80EE	First-time buyer interest	₹50,000	Specific property & loan limits apply
80EEA	First-time buyer interest	₹1.5 lakh	Property ≤ ₹45 lakh; timeline specific

How to Claim Home Loan Tax Benefits

Step 1: Prepare Required Documents

Property ownership proof
Home loan sanction letter and account statement
Bank certificate for interest/principal paid
Municipal tax receipts

Step 2: Submit to Employer (Salaried Individuals)

Submit documents to your employer to adjust TDS accordingly.

Step 3: Self-Calculation (Self-Employed Individuals)

Calculate income from house property and deduct eligible amounts.

Step 4: File Income Tax Return (ITR)

Report all deductions under appropriate sections:
- Section 80C for principal
- Section 24(b) for interest

Impact of New Tax Regime on Home Loan Deductions

Under the new tax regime, most housing-related tax deductions are not available:

Deduction	Availability in New Regime
80C (Principal, Stamp Duty)	Not allowed
80EE / 80EEA	Not allowed
24(b) – Self-occupied	Not allowed
24(b) – Let-out	Allowed
Set-off loss from house property	Cannot set off against salary/other income

About the Author

Rohan

Rohan is our expert content writer specializing in business registration, tax laws, trademark regulations, and corporate compliance. His insightful articles provide clear, practical guidance, empowering businesses to navigate complex legal and regulatory landscapes with confidence

June 26, 2025