Purchasing a house is one of the biggest financial decisions you will ever make. Since taking a home loan is the most common way to fulfil your dream of owning a house, the Government of India has introduced several tax benefits, clauses, and rules for potential homeowners. Enlisted below, as in September 2021, are few tax benefits, under home loans, for buyers of a new home in India. It is important to stay abreast of the changes introduced and to get the relevant information from credible sources before making any financial commitment.

SECTION 24: DEDUCTION OF INTEREST ON HOME LOAN PAYMENT

Under Section 24 of the Indian Income Tax Act, homeowners can claim income tax benefits up to Rs. 2 lakhs on the interest paid on repayment of home loans. While repaying the home loan, there are two components: the Principal Amount and the Interest on the Principal Amount. Under Section 24, income tax benefits up to Rs. 2 lakhs per year are applicable only on the interest paid on the total home loan. The condition being that the loan must be for construction of a new home, and the construction should be completed within 5 years of the home loan approval.

SECTION 80C: INCOME TAX BENEFITS ON THE PRINCIPAL AMOUNT OF THE HOME LOAN

Under Section 80C of the Income Tax Laws, a homeowner can avail benefits up to Rs. 1.5 lakhs per year on the repayment of the principal amount of a home loan. The condition being that the new home constructed shouldn’t be sold within 5 years.

DEDUCTION ON STAMP DUTY AND REGISTRATION FEES

The Government also allows income tax benefits on the money spent on Stamp Duty and Registration Fees for a new home. However, this deduction is applicable only under Section 80C and within the maximum of Rs. 1.5 lakhs limit of availing tax benefits.

SECTION 80EEA: OTHER ADDITIONAL INCOME TAX BENEFITS

In 2019, the Government of India introduced an additional income tax benefit under Section 80EEA. This is applicable only for those home loans which were approved between 1st April 2019 and 31st March 2020. For availing income tax benefits under Section 80EEA, the Stamp Duty of the new home should be less than Rs. 45 lakhs and the maximum limit of Rs. 1.5 lakhs per year is applicable for the same. Besides, the homeowner shouldn’t be availing any income tax benefits under Section 80EE to avail benefits under Section 80EEA. However, Section 24 can be used along with Section 80EEA for additional benefits.

Thinking of buying a house of your own? Then, why wait! There are plenty of perks available to you if you do decide to buy one. Apart from the flexibility of beautifying it as you like and securing your future, there are several financial benefits too. Avail most benefits and maximize your returns with the right knowledge, informed decision-making and the guidance of your income tax consultant.