Tax Benefits are enjoyed on both Interest paid & the principal repaid by the home loan borrower. Under Section 24(d) of Income Tax, a maximum of Rs. 1,50,000 of interest payable can be deducted on the home loan.
Under Section 80(c) of Income Tax, the eligibility for tax deduction of the Principal amount for the repayment of loan along with other savings & investments is allowed up to the amount of Rs. 1,00,000.
Section 80C: Tax benefit on Home Loan (Principal Amount)
The maximum tax deduction amount allowed under Section 80C of the Income Tax Act to be paid as Repayment of Principal Amount of Home Loan by an Individual/HUF is Rs. 1,50,000. (Increased from 1 Lakh to Rs. 1.5 Lakh in Budget 2014)
This tax deduction under Section 80C is can be made via payment basis irrespective of the year for which the payment has been made. The amount for tax deduction under Section 80C as Stamp Duty & Registration Fee is accepted even if the Assessee has not taken Loan.
Tax Benefit on Home Ladn: 80EE, Section 24 & 80C
One of the vital guidelines that needs to be remembered when taking a Home Loan is the Tax Benefit. In order to further elaborate the Tax Benefit on Home Loan, the Repayment of Home Loan would be divided into 2 components:
- Repayment of the Principal Amount
- Repayment of the Interest on Home Loan
Owing to the fact that the repayment comprises of 2 different components, the tax benefit on home loan is ruled by separate sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.
Tax Benefit on Home Loan (Interest Amount)
Section 24 of the Income Tax Act allows the deduction of tax benefit on home loan for payment of interests. As per this Section, the earnings from the House Property would be reduced by the aggregate sum of Interest paid on Home Loan where the loan has been accepted for the purpose of Renewal/Purchase/Reconstruction/Repair/Construction of a Residential House Property.
A maximum tax deduction limit of Rs. 2 Lakhs is allowed under Section 24 for a self-occupied property.(increased in Budget 2014 from 1.5 Lakhs to Rs. 2 Lakhs). Please Note: In case a property has not been occupied themselves by the owner owing to the fact of his employment, business or profession carried on at any other place, if they have to reside at another place not belonging to them, then the amount of Rs. 2 Lakhs only shall be the tax deduction allowed under Section 24.