What Are The Tax Benefits On Home Loans?

Owning a property is a significant milestone, particularly in a market where property prices continue to soar. To support aspiring homeowners, the Indian Government has introduced several incentives, including tax benefits on Home Loans. These benefits not only make property ownership more accessible but also alleviate the financial burden of repayment over time. In this article, we delve into the various tax benefits available on Home Loans, ensuring you maximize your savings.

When you take out a Home Loan, your monthly payments, known as Equated Monthly Instalments (EMIs), consist of two main components:

• Principal Amount: The original sum borrowed from the lender.
• Interest Payment: The cost of borrowing the principal amount.

These components are eligible for different tax benefits under distinct sections of the Income Tax Act. Let's explore these in detail.

• Eligibility: You can claim a deduction of up to Rs. 1.5 lakh on the principal repayment of your Home Loan.
• Conditions: To retain this deduction, you must hold onto the property for at least five years. Selling the property before this period results in the deducted amount being added back to your income in the year of sale.
• Additional Benefits: Registration and stamp duty charges can also be claimed under Section 80C.

• Eligibility: Under Section 24(b), you can claim a deduction of up to Rs. 2 lakh on the interest component of your Home Loan.
• Conditions: This deduction applies only if the property's construction is completed within five years. If it exceeds five years, the deduction limit drops to Rs. 30,000.
• Special Case: For Let-Out Properties, there is no upper limit on the interest deduction.

• Eligibility: First-time home buyers can claim an additional deduction of up to Rs. 50,000 on the interest paid each financial year.
• Conditions: To qualify, the Home Loan amount should not exceed Rs. 35 lakh, and the property's stamp value should not exceed Rs. 45 lakh.

If you opt for a joint Home Loan, each borrower can claim the following deductions:

• Interest Deduction: Up to Rs. 2 lakh each under Section 24(b).
• Principal Repayment: Up to Rs. 1.5 lakh each under Section 80C.
   

Note: To claim these deductions, all borrowers must be co-owners of the property. The co-owners can be family members or friends, providing flexibility in property ownership and loan repayment. 

If you take out a second Home Loan, you are eligible to claim tax benefits on the interest paid for this additional loan. The entire interest amount can be claimed as a deduction, making it financially viable to invest in more than one property.

To apply for a Home Loan, click here.

Want to know about the tax benefits on a second Home Loan? Click here to read more.

​​​​​​​*Terms and conditions apply. Home Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.