Purchasing a house is also a very important milestone and most of the Indians apply home loans to finance the purchase. The good news? The government provides tax benefits on repayment of home loan which can reap huge benefits in lowering your tax liability. Sections 80C and 24(b) of the Income Tax Act provide taxpayers with deductions on the payment of principal amounts and interest amount of repayments respectively.
Section 80C – Tax Deduction on Principal Repayment
What Is Section 80C?
Principal repayment of home loan is one of the investments and expenses that are RCs under Section 80C of the Income Tax Act. The upper limit of deduction under this section is 1.5 lakh in a financial year.
Eligibility Conditions
To claim this deduction:
- The home loan must be taken from a bank, housing finance company, or any notified institution.
- The house must be fully constructed; deductions aren’t allowed for under-construction properties.
- The property should not be sold within 5 years of possession. If sold earlier, the claimed deductions are reversed and added back to your income.
What Is Included Under 80C?
- Principal portion of EMI
- Stamp duty and registration charges (can be claimed in the year they are paid)
Pro Tip:
In a situation where you intend to invest in other 80C options such as PPF or ELSS, then you should plan your investing to ensure that you go and exhaust the 1.5 lakhs and still get a substantial savings.
Also Read:
- Tax Advantages A Comparison Between Farmland and Commercial Property
- Tax Planning for NRIs: How Non-Resident Indians Can Save on Property Taxes
- Capital Gains Tax Hacks How to Minimize Tax When Selling Property in India
- Tax Benefits Showdown What You Gain from Farmland vs SCO Ownership
Section 24(b) – Tax Deduction on Interest Paid
What Is Section 24(b)?
Section 24(b) provides a deduction on the interest paid on your home loan. It applies whether you live in the house or rent it out.
Deduction Limits
- Self-Occupied Property: Up to ₹2 lakh per financial year.
- Rented or Deemed Let-Out Property: Entire interest can be claimed, but loss from house property is capped at ₹2 lakh per year, and the remaining can be carried forward for the next 8 years.
Eligibility Conditions
- The loan must be used for purchase, construction, repair, renewal, or reconstruction.
- Construction must be completed within 5 years from the end of the financial year in which the loan was taken.
Documents Required
- Loan Interest Certificate from your bank or lender
- Proof of possession or completion
- Property ownership documents
Pro Tip:
In case you and your spouse are co-owners and co-borrowers then you can claim both of your tax deductions separately up to 2 lakh limit under Section 24(b) and 1.5 lakh limit under Section 80C each which in total you can get 4 lakhs tax benefit whereas only 2 lakh tax benefit is given under the same Section.
Additional Benefits Under Section 80EE and 80EEA
Section 80EE – For First-Time Home Buyers
- Deduction up to ₹50,000 on interest, in addition to Section 24(b)
- Home loan should not exceed ₹35 lakh, and property value should not exceed ₹50 lakh
Section 80EEA – Additional Relief for Affordable Housing
- Available for properties purchased under the government’s affordable housing scheme
- Deduction of ₹1.5 lakh on interest over and above Section 24(b)
- Valid only for home loans sanctioned between 1 April 2019 and 31 March 2022 (may change with new budget policies)
How to Claim Home Loan Tax Benefits: Step-by-Step
Step 1: Get Your Home Loan Certificate
Ask your bank or lending institution for a Home Loan Interest Certificate, which breaks down the principal and interest paid.
Step 2: Declare the Home Loan in Your Office
If you’re a salaried employee, submit the loan details in your investment declaration (Form 12BB) so that your TDS reflects the benefits.
Step 3: File Your ITR Carefully
- Enter Section 80C amounts under “Deductions under Chapter VI-A”.
- Enter Section 24(b) interest under “Income from House Property” (it may show as a negative income if you claim deduction).
Step 4: Submit Necessary Documents
Keep all receipts, loan certificates, and property documents handy in case of assessment or audit.
How Much Can You Save?
Suppose you pay ₹3 lakh annually as EMI:
- Principal: ₹1.2 lakh → Deductible under 80C
- Interest: ₹1.8 lakh → Deductible under 24(b)
Tax Benefit (assuming 30% tax bracket):
- ₹1.2 lakh @ 30% = ₹36,000
- ₹1.8 lakh @ 30% = ₹54,000
Total Savings = ₹90,000 per year
Common Mistakes to Avoid
- Claiming interest under 80C (only principal is allowed)
- Forgetting to claim stamp duty & registration fees
- Not verifying completion/possession dates
- Missing the 5-year lock-in rule for principal deduction
Make the Most of Your Home Loan
With the proper interpretation and usage of Sections 80C and 24(b), you can get to save at least 3.5 lakh in deductions annually, and even more in cases when Section 80EE or 80EEA apply. The advantages not only provide relief to your financial commitment but may also assist in good long term tax planning.
In case you do not know how to think about these deductions or calculate and claim these deductions, hire a trusted tax advisor or use verified tax filing websites. Each rupee that you save gets your dream house and financial well-being.
Want help in planning your home loan or need clarity on claiming tax deductions?
Connect with our trusted tax and property consultants at The Whitelisted Estate — where honest advice meets smart real estate planning.
FAQ,s Frequently asked questions
1. What is Section 80C and how does it apply to home loans?
Section 80C allows taxpayers to claim deductions on certain eligible investments and payments, including the principal repayment of a home loan. It helps reduce taxable income within the limits set by the income tax laws.
2. What is Section 24(b) and which part of the home loan does it cover?
Section 24(b) provides tax benefits on the interest portion of a home loan. It allows homeowners to claim deductions on interest paid during the financial year, subject to specific conditions.
3. Can first-time homebuyers claim these tax benefits?
Yes, first-time homebuyers are eligible to claim tax benefits under both Section 80C for principal repayment and Section 24(b) for interest, provided the loan and property meet the required conditions.
4. Are there any conditions on the property to claim home loan tax benefits?
Ensure the property is self-occupied or rented out, and confirm that a recognized financial institution has sanctioned the home loan. Also, follow tax regulations for construction or possession timelines.
5. Can joint home loan borrowers claim separate tax benefits?
Each borrower can separately claim deductions for their share of principal repayment under Section 80C and interest under Section 24(b) if they take a home loan jointly, following the applicable rules.
