tax benefits on home loan under income tax act

Buying a home is one of the biggest financial decisions you'll ever make. Thankfully, the Indian government offers various tax benefits on home loans to ease the financial burden and encourage homeownership. These tax deductions fall under different sections of the Income Tax Act, helping taxpayers reduce their liability and make smart use of their finances.

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Jul 15, 2025 - 17:17

1. Deduction Under Section 80C: Principal Repayment

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 repayment of your home loan.

Key Points:

Applicable only if the home is not sold within 5 years of possession.
Includes payments made towards stamp duty and registration charges (only in the year of purchase).
The house must be fully constructed; this benefit is not available during the construction phase.

2. Deduction Under Section 24(b): Interest on Home Loan

Section 24(b) allows for a deduction of up to ?2 lakh per year on the interest paid on your home loan for a self-occupied property.

Key Points:

For rented or deemed-to-be-let-out properties, there is no upper limit, but the total loss from house property is capped at ?2 lakh.
The construction or purchase should be completed within 5 years from the end of the financial year in which the loan was taken.
Pre-construction interest is also eligible, but it is claimed in five equal installments starting from the year of completion.

3. Additional Deduction Under Section 80EEA: Affordable Housing

To further support affordable housing, the government introduced Section 80EEA, which provides an additional deduction of up to ?1.5 lakh on interest paid on home loans.

Eligibility Criteria:

The stamp duty value of the house should not exceed ?45 lakh.
The loan should be sanctioned between 1st April 2019 and 31st March 2022.
The taxpayer should not own any other residential property on the date of loan sanction.
This deduction is over and above the ?2 lakh limit under Section 24(b).

4. Deduction Under Section 80EE: For First-Time Buyers (Before 80EEA)

For loans sanctioned between 1st April 2016 and 31st March 2017, Section 80EE allows an additional deduction of ?50,000 on home loan interest.

Key Conditions:

Loan amount should not exceed ?35 lakh, and the property value should not exceed ?50 lakh.
The taxpayer should be a first-time homebuyer.

Note: Taxpayers can claim either Section 80EE or 80EEA, not both.

5. Joint Home Loans Double the Benefit

If the home loan is taken jointly, each co-borrower (typically spouses or family members) can claim individual deductions:

Up to ?1.5 lakh under Section 80C (principal)
Up to ?2 lakh under Section 24(b) (interest)
Additional deduction under Section 80EEA if eligible

This effectively doubles the tax benefits, provided both are co-owners and contribute towards repayment.

6. Rental Income and Tax Planning

If you let out the property, the entire interest paid on the home loan is eligible for deduction. However, as per the current rules, the maximum loss from house property that can be set off against other income is ?2 lakh per year. The balance loss can be carried forward for 8 years

Conclusion

The Income Tax Act of India offers multiple avenues to reduce your tax liability through home loan deductions. By effectively using Sections 80C, 24(b), 80EE, and 80EEA, you can save lakhs every year while investing in your dream home.