Last Updated on March 16, 2024 by Jawad Ali

Home Loan Tax Benefits 2022

Just as home loans make owning a house easier, income tax rebates offered on these home loans lead to huge savings for home owners. Tax deductions are calculated on the basis of taxable income, and not the net earnings. 

As per the Income Tax Act, borrowers can avail home loan tax benefits under the following sections and categories:

Section 80C

Section 80C provides annual tax deduction on principal repayment of home loan up to Rs 1.5 lakh. This exemption can be claimed just once, which means, during a particular financial year. Other costs associated with buying the property such as, stamp duty and registration charges are also considered for this calculation.

Section 24

As per Section 24, you can avail tax rebates on the home loan interest component of up to Rs 2 lakh. In order to claim this, however, the property in question should be self-occupied and complete its construction within 5 years. In case the construction is not completed with this time frame, the tax savings will be drastically reduced to just Rs 30000.  

If your home loan lets you finance the purchase, construction, repair or reconstruction of a residential property; you can claim tax benefits under Section 24. If your property is not self-occupied, then there is no limit to the rebate amount, be it before or after completion of 5 years. Also, there is no restriction on selling of the property. 

Section 80 EE

This ITA section offers home loan tax benefit for first-time homeowners, who can avail an additional Rs. 50000 rebate on the home loan interest payment. However, this applies only if you have no other property in your name. Keep in mind that the home loan principal amount must not exceed Rs. 35 lakh and should not be valued at more than Rs. 50 lakh. 

Section 80 EEA

Under this section, you can claim an additional Rs. 1.5 lakh tax savings on your home loan interest component, besides the interest-related rebates already offered under ITA Section 24. Moreover, you can keep claiming this benefit until the full repayment of your home loan. 

Most of these tax benefits are only applicable upon the complete construction of the property. But in case of a ready-to-move-in property, these exemptions can be availed from the start of possession.

Joint Home Loan Tax Benefits 

When you opt for a joint home loan, this further reduces your tax liabilities. If the co-borrower is also the co-owner, your savings potential doubles. Under ITA Sections 24 and 80 C, both borrowers can each avail tax exemptions of up to Rs 2 lakh on interest payment and up to Rs 1.5 lakh on the principal repayment. Thereby, each borrower can claim annual tax benefits up to Rs 3.5 lakh. 

Tax benefits for Under-Construction Property

The tax benefits on home loan principal repayment for an under-constructed property is the same as for ready-possession property. Therefore, you can claim up to Rs 1.5 lakh under ITA Section 80C.

You cannot avail the tax deduction on interest payment of up to Rs 2 lakh before the construction is complete. In such cases, this deduction will accumulate for 5 years until completion. It can then be claimed through five yearly installments starting from the year of home completion.     

Tax Benefits If You Sell Property Within 5 Years

If you decide to sell your property within 5 years of acquiring it, the tax benefits claimed until that time will be considered null and void. When you sell, you give up all the tax benefits. These will then be added to your taxable income during the next financial assessment. 

Home Loan Tax Benefit Calculator

Home loan tax benefit calculator is an easy and convenient online tool that instantly calculates tax deductions during loan repayment. It can be used to accurately assess tax liabilities; before and after accounting for tax benefits. The result is determined based on information like year of assessment, age category, annual earnings, amount of interest paid and amount of principal repayment. 

Summing It Up

With the government thrust on making housing economical and budget-friendly, various housing schemes have been launched and concessions announced. As per the provisions in the 2021 Union Budget, home loan tax exemptions of Rs 1.5 lakh on the interest payable for affordable housing has been extended till 31 March 2022, so that more number of people can take advantage of these benefits. 

Additional Link: how to apply for second home loan

Applying for a home loan is easy. Just keep these points in mind and check your home loan eligibility criteria with your bank or lender. Your eligibility is based on many factors like your credit profile, age and financial standing among others. These are very crucial for faster and smoother processing of your home loan application. 

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Noah Patel is a finance specialist with over 10 years of experience in the financial industry. He has worked with a variety of clients, including individuals, small businesses, and large corporations, to help them achieve their financial goals. Noah's expertise includes financial planning, investment management, risk management, and retirement planning. He is dedicated to helping his clients make informed financial decisions that align with their long-term objectives. Noah is a frequent contributor to financial publications and has written extensively on topics such as personal finance, investing, and financial planning. His mission is to educate and empower individuals to take control of their financial future. When he's not working with clients or writing, Noah enjoys traveling, playing tennis, and spending time with his family.