In India, you can claim a deduction on home loan in your income tax return under different sections of the Income Tax Act. With the rising property prices in India, it has become increasingly difficult for many people to buy a house without taking a home loan. Home loans offer lower interest rates compared to other types of loans, making it an attractive option for people who want to finance their home purchase.
Owning a house is considered a good investment in India. It not only provides a sense of security but also offers a potential source of passive income through rental income or capital appreciation.
What Is A Home Loan?
Home loan is the money borrowed from a bank or a housing finance institution on interest for buying / constructing / upgrading a residential real estate property.
Does The Tenure Affect The Loan Cost?
Longer the tenure you have, the lesser will be your EMI but higher would be the interest outgo. In shorter tenures, you pay a greater EMI, but the loan gets repaid faster and you pay less by way of interest.
What Is The Tax Rebate Available On A Home Loan?
Interest paid on housing loans is allowed as a deduction to the extent of 2 lakh in respect of self-occupied property. In order to provide a further impetus, an additional deduction of up to Rs 1,50,000 for interest paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued up to 45 lakh.
The Principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh.
Section 24: Deduction on Interest on Home Loan
Under this section, you can claim a deduction on the interest paid on the home loan for a self-occupied property up to a maximum of Rs. 2 lakh per annum. If the property is not self-occupied, then there is no limit on the deduction. This deduction is available only for the property in which you reside and not for any other property that you may own.
Section 80C: Deduction on Principal Repayment
Under this section, you can claim a deduction on the principal repayment of the home loan up to a maximum of Rs. 1.5 lakh per annum. This deduction is available only for the principal repayment made during the financial year.
Also Read: Income Tax Return: Know These ITR Basics Before It’s Too Late
To claim these deductions, you need to submit the details of the interest and principal repayment in the appropriate sections of your income tax return. You should also keep the necessary documents, such as loan statements, interest certificates, and repayment schedule, ready for verification if required by the IT department.
It is advisable to consult a tax expert for proper guidance on claiming deductions on home loans in your income tax return.
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