The government offers home loan tax benefits under the Income Tax Act, 1961. These home loan tax benefits not only allow home loan borrowers to reduce their income tax liability but also allow them to better manage their cash flow and repay their loans comfortably. 

Home loans are repaid in the form of small, affordable EMIs. Each EMI constitutes a principal and an interest component. Home loan tax benefits are applicable on both the principal and interest components of the home loan. In this article, we talk about housing loan interest deductions and how to maximize them.

Simple Tips on How to Maximise Home Loan Interest Deduction

 

1. Section 24(b) of the Indian Tax Act talks about home loan tax benefits on the interest component of the loan or the money diverted towards the repayment of the interest portion of one's loan. The maximum limit mentioned under Section 24(b) is Rs.2 Lakh. 
2. Joint home loan borrowers can maximize housing loan interest deduction by claiming tax benefits separately under Section 24(b) of the Income Tax Act. For example, let's assume that a husband and wife took a loan together. Now, both the husband and the wife can claim tax benefits separately under Section 24(b) of the Income Tax Act and increase their combined housing loan interest deduction to Rs.4 Lakh. Joint home loans can not only be availed of by a husband and wife. A father and son; a father and an unmarried daughter; and a son and his mother can also avail of joint home loans and maximize housing loan interest deduction. 
3. Borrowers who have more than a single home loan can also maximize home loan interest deduction by claiming home loan tax benefits on all the loans. However, the maximum tax benefit on home loan interest cannot exceed Rs.2 Lakh, even if the loan borrower has more than two home loans. 
4. Home loan borrowers can also maximize home loan tax benefits by understanding that the upper limit of Rs.2 Lakh applies only to self-occupied properties. For rented-out properties, there is no upper limit on the amount that can be claimed as interest deduction under Section 24(b). In the case of rented-out properties, the entire amount can be claimed as a home loan interest deduction under Section 24(b).
5. First-time homebuyers can also increase home loan tax benefits by claiming tax deductions under Section 80EE and Section 80EEA. The maximum limit permissible under Section 80EE is Rs.50,000 and the maximum limit permissible under Section 80EEA is Rs.1.5 Lakh. However, one can claim these tax benefits only if one meets all the eligibility criteria. Further, one can claim home loan tax benefits under either of these two categories and not both simultaneously. 

In the next section of this article, we discuss the qualifying criteria for claiming home loan interest deduction under Section 80EE and Section 80EEA.

Section 80EE: Eligibility Criteria 

 

Section 80EE of the Income Tax Act: Eligibility Criteria

Section 80EE of the Income Tax Act allows home loan borrowers to claim an additional tax benefit of up to Rs.50000 provided they meet the following eligibility criteria: 

1. The home loan borrower must be a first-time homebuyer. They must not have had any other property in their name at the time of sanctioning of the loan. 
2. The value of the property bought with the loan money must not exceed Rs.50 Lakh and the value of the loan must not be any higher than Rs.35 Lakh. 
3. The home loan must have been sanctioned by a financial institution or a housing finance company. 
4. The borrower must have availed of the loan between April 1, 2016, and March 31, 2022.

Section 80EEA: Eligibility Criteria 

One can claim home loan tax benefits under Section 80EEA if they meet the following qualifying criteria:

1. The home loan borrower must have had no other property in their name on the day of applying for the loan. 
2. The stamp duty value of the house must be no more than Rs.45 Lakh. 
3. The home loan borrower must have availed of the home finance, from a financial institution or housing finance company between April 1, 2019 and March 31, 2022. 
4. Lastly, the home loan borrower must not be eligible to claim home loan tax benefits under Section 80EE of the Income Tax Act.

We hope these simple tips will help you maximize home loan tax benefits and savings.