Income Tax: Tax Benefits of Housing Loan in India

Income Tax: Tax Benefits of Housing Loan in India

Any tax benefit on housing loan is covered under section 24, 80C and 80EE of the income tax act, 1961.

            The important matter to be kept in mind is the tax benefit of housing loan when a person takes a housing loan. Thus, there are different sections available for taking tax benefit on housing loan and this benefit are claimed as a tax deduction at the time of filing of the income tax return. The repayment of the amount of housing loan is to be divided into 2 components:

      –          Repayment of principal amount
      –          Repayment of the interest on home loan
  Ø  Section – 80C :- income tax benefit on home loan (principal amount)

            When an INDIVIDUAL or HUF made the repayment of the principal amount of home loan, the deduction is allowed under section 80C up to a maximum of Rs. 100000/- only. However, the available tax benefit under this section is allowed only if the construction is complete and the completion certificate has been awarded. No deduction is allowed for repayment of the principal amount for those years in which the property is under construction.

            The deduction of Rs. 100000/- is the total deduction available under section 80C i.e., PPF account, Equity oriented MFs, Tax saving fixed deposits etc. are included for deduction under section 80C. If the assesses has not taken a loan, but paid stamp duty and registration fee then, it can be claimed as deduction under section 80C.

Income Tax E-filing Return
Process of Filing Rectification Return
Common Errors in Filing Rectification Return
Common Mistakes in E-filling of Income Tax Return (ITR)
  Ø  Section – 24 :- income tax benefit of interest on home loan

            Under section 24, the interest paid on housing loan is to be reduced from the income from house property when the loan has been taken for the purpose of purchase or construction or repair of the housing property.

            The maximum deduction limit of Rs. 150000/- is available for a self-occupied property under this section. However, the property for which the loan has been taken is not the self occupied property of the assesses then there is no maximum limit is applied and he/she can claim the deduction for the whole amount. The benefit of deduction of interest on housing loan of Rs. 100000/- is to be reduced to Rs. 30000/- only if the construction of such property is not completed within 3 years from the end of the financial year in which the loan was taken.

            While taking the benefit of deduction under section 24, the following important points must be taken into consideration:

                        I.       &n

bsp;    Interest paid on outstanding amount is not allowed as a tax deduction.

                        II.            Any deduction cannot be claimed for a commission paid for arranging the loan.
                 III.            If the person acquired or constructed the property with borrowed funds, then he/she can claim the deduction of interest on a home loan.
                      IV.            This tax deduction is to be available to the assesses only if the construction is completed within 3 years from the end of the financial year in which the capital is borrowed.
  Ø  Section – 80EE :- income tax benefit of interest on home loan (first time buyer)

            While the budget 2013 has been announced by P. Chidambaram, a new section in the income tax act is included known as section 80EE. This section provides additional tax deduction of Rs. 100000/- to the first time home buyers with the following conditions:
                        I.            The loan is to be sanctioned between 1st April, 2013 and 31st March, 2013.
                      II.            The amount of the loan does not exceed Rs. 2500000/-.
                    III.            On the date of sanction of loan, the assesses does not own any house property.
·         Available deductions in all of the 3 sections –

Quantum of deduction
Self-Occupied property
None Self-occupied property
Section 24
No limit
Section 80C
Section 80EE


Add a Comment
  1. thanks for the very useful information. In which column of ITR 1 the deduction under section 24 is to be shown? I Couldn’t find any.Please give me a reply. Thank you.

    1. @p.krishnanunni,

      Hi ITR 1 is for Individuals having Income from Salary & Interest only…..

      If you want to take deduction under section 24 you have to file ITR 2.

      There u will get the place where you can claim it….

      If Still any confusion ask me for it…

      Common Errors while filing ITR – Must Read before filing of Income Tax Return –

      1. thank you

  2. Hi,

    I am paying monthly amount against the loan to bank from where I have taken House loan in Jan-14. As per my current form-16, there is some negative amount under section 24 deductions. I am not sure how and in which ITR I can fill the same.

    Please assist.


    1. Hi Subal,

      First Sorry for late reply.

      The negative amount in Form 16 is nothing but the house loan interest in which you pay during the year.

      For filing Income tax Return you have to file ITR 2 for the respective Assessment Year. Because in this year you have Salary income as well as House Property Income (Which is negative). If you have only Salary income then you have file ITR 1.

      And its ok if the house is under construction.

      Good Luck.

  3. Hi,

    Forgot to add the house is under construction.


  4. Hi,

    Would like to know if I have taken a home loan and now got the possesion. Now would like to buy another loan for reconstrunction and furniture and the same was approved by bank. Now I have 2 loan account numbers for the same property. Can I get the tax benifit for both the loan accounts? We will get 2 provisional certificate at end of the year – please advice what is the tax rules to get benefits from both the accounts?

    Thanks In advance.

    1. Hi Sachu

      You can get tax benefit of both the loans.

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