Owning a home is a cherished milestone for many, but beyond the emotional value and security it brings, it also offers significant financial advantages. One of the most rewarding aspects is the home loan tax benefit. It substantially reduces your annual tax liability.
If you’re servicing a home loan, both the principal and interest components of your EMI (Equated Monthly Instalment) are eligible for tax deductions. With proper guidance from a tax advisor or expert tax consulting services, you can make smarter financial decisions.
Let’s explore the various tax-saving opportunities your home loan offers and how to make the most of them.
Understanding Your EMI: Principal and Interest
It’s essential to understand your home loan EMI structure. Every EMI consists of two parts:
- Principal repayment – the amount that reduces your actual loan.
- Interest payment – the cost you pay to borrow the money.
The home loan tax benefit applies to both components but under different sections of the Income Tax Act. Understanding these sections is key to effective tax planning and tax saving on home loan repayments.
1. Principal Repayment – Section 80C
Under Section 80C of the Income Tax Act, you can claim a deduction of up to ₹1.5 lakh per financial year on the principal component of your home loan EMI. This section also includes other investments like ELSS, PPF, NSC, and life insurance premiums, so your total deduction across all eligible instruments is capped at ₹1.5 lakh.
Eligibility Conditions:
- The home loan must be from a recognised financial institution or bank.
- The property should not be sold within five years from the end of the financial year in which possession was obtained; otherwise, the claimed deduction will be reversed.
A professional tax advisor can help you balance your Section 80C investments smartly to ensure optimal tax benefit without duplication or overlap.
2. Interest Payment – Section 24(b)
One of the most valuable home loan tax benefits comes under Section 24(b), which allows for an annual deduction of up to ₹2 lakh on the interest paid on home loans for self-occupied properties.
For Rented Properties:
- If your property is rented out, there is no cap on the interest deduction. However, total loss from house property that can be adjusted against other income is limited to ₹2 lakh per year.
Eligibility Conditions:
- The loan must be taken for purchase or construction of a house.
- The construction or acquisition must be completed within five years from the end of the financial year in which the loan was taken.
- You must have an interest certificate from your lender as proof.
Tax consulting services can guide you on how to structure your finances if you’re managing multiple properties or rental income.
3. Additional Tax Deductions for First-Time Buyers
First-time homebuyers are eligible for additional tax benefits beyond Sections 80C and 24(b), thanks to Section 80EE and Section 80EEA.
80EE Tax Benefit:
- Deduction of up to ₹50,000 on interest paid, over and above Section 24(b).
- Applicable only if:
- Loan is sanctioned between April 1, 2016, and March 31, 2017.
- Property value does not exceed ₹50 lakh.
- Loan amount does not exceed ₹35 lakh.
- You do not own any other residential property at the time of loan sanction.
- Loan is sanctioned between April 1, 2016, and March 31, 2017.
Section 80EEA:
- Offers an additional deduction of up to ₹1.5 lakh on interest.
- Applicable if:
- Loan was sanctioned between April 1, 2019, and March 31, 2022.
- Property value does not exceed ₹45 lakh.
- You are a first-time homeowner.
- Loan was sanctioned between April 1, 2019, and March 31, 2022.
These provisions can help first-time buyers save up to ₹3.5 lakh annually on interest paid. Consulting a trusted tax advisor ensures you meet the eligibility requirements and avoid claim rejections.
4. Joint Home Loans – Doubling the Benefits
If you’re buying a house jointly (e.g., with your spouse or parents), and both parties are co-owners and co-borrowers, you can effectively double your home loan tax benefit.
Each co-borrower can claim:
- ₹1.5 lakh under Section 80C for principal repayment
- ₹2 lakh under Section 24(b) for interest payment
This strategy works best in dual-income households where both partners file tax returns and contribute to EMI payments. Structured properly with help from tax consulting services, joint loans can significantly lower the family’s total tax liability.
5. Tax Benefits for Under-Construction Properties
If your home is still under construction, you won’t be able to claim deductions under Section 24(b) until possession is obtained. However, there’s a provision for pre-construction interest deduction.
You can claim the total interest paid during the construction phase in five equal installments starting from the year of possession, subject to the ₹2 lakh annual cap under Section 24(b).
While the principal repayment won’t qualify under Section 80C until construction is completed, tracking and documenting your payments from day one is essential for future tax claims.
6. How to Maximise Your Home Loan Tax Savings
To ensure you’re extracting the full value of your home loan tax benefit, follow these tips:
- Maintain accurate records: Always collect your interest and principal certificates from your lender annually.
- Time your possession carefully: Delays in construction can impact your eligibility for deductions under Section 24(b).
- Leverage joint ownership: Distribute ownership and repayment in a way that maximises deductions for all borrowers.
- Hire a professional: A certified tax advisor can assess your income, property details, and loan terms to customise your tax strategy.
7. How Fincart Can Help You Save More
At Fincart, we believe that informed financial choices lead to long-term wealth and security. Our expert tax consulting services are designed to help individuals, especially salaried professionals and young homeowners, navigate the complexities of tax laws.
Whether you’re claiming your first 80EE tax benefit, figuring out joint loan strategies, or juggling multiple deductions, our dedicated team will ensure you’re not leaving any money on the table.
We offer:
- Personalised tax consultation sessions
- Documentation review and filing support
- Home loan benefit optimisation
- Guidance on real estate-linked tax strategies
With Fincart, you don’t just buy a house—you unlock financial potential.
Conclusion
A home loan is more than a step toward property ownership—it’s a powerful tool for reducing your tax burden. From principal repayment under 80C and interest deduction under 24(b) to exclusive 80EE tax benefits for first-time buyers, the Indian tax system offers multiple avenues to make homeownership financially rewarding.
By understanding these deductions and aligning your loan strategy with expert advice from tax advisors and tax consulting services, you can maximise your tax saving on home loan and take a smarter path toward wealth creation.
Let Fincart help you take full advantage of your home loan benefits. Speak to our tax experts today and start saving smarter!
FAQs
How to claim tax benefit on joint home loan?
Each co-owner should obtain the loan interest and principal certificates, ensure their ownership share is defined, and file income tax returns individually to claim deductions under Sections 80C and 24(b) based on their share. The property must be jointly owned and the loan jointly repaid.
Can co-applicant claim tax benefit on home loan?
Yes, if the co-applicant is also a co-owner and contributes to repayment, they can claim tax benefits under Sections 80C and 24(b) based on their share.
How to claim tax benefit for second home loan?
If the second home is let out or deemed let out, claim unlimited interest deduction under Section 24(b) in your ITR. Principal repayment under Section 80C is allowed up to ₹1.5 lakh, combined for all homes. Maintain loan certificates and ownership proof for tax filing.
How can I claim home loan benefit in income tax?
You can submit the loan interest and principal certificates to your employer or claim it while filing ITR under Sections 80C (principal) and 24(b) (interest).
