Many first-time
home buyers often remain confused about the Income Tax benefits that they can
avail on home loan after the purchase of their first residential property. If
you are buying home first time, you are entitled to get Income Tax benefits on
home loan under three sections- Section 80C, Section 24 and Section 80EEA of
Income Tax Act. These sections of Income Tax Act let you avail home loan
benefit of Rs 5 lakh annually. Let's
understand with this detailed chart of Income Tax sections: -
Section |
Maximum Tax Benefits(Rs) |
Tax saving component |
Conditions |
80C |
1,50,000 |
Home Loan Principal and Stamp Duty |
- Property should not be sold within 5 years of possession. |
Section 24 |
2,00,000 |
Home Loan Interest |
- Income Tax assessee or any family member should
be living in that house - Full interest can be claimed if house is on rent. |
80EEA |
1,50,000 |
Home Loan Interest |
- Stamp duty value of property should be up to Rs
45 Lakhs - Loan sanction date should be between 1st Apr
2019 to 31st Mar 2022 - Assesse should not own any residential property
till sanction of loan. - Should not be claiming any amount under income
tax section 80EE. - Loan should be borrowed from Financial Institution only. |
Now, let’s
consider a scenario that you have purchased a property in April 2021, property
value is Rs 50 Lakhs and you have taken 80% loan i.e. Rs 40 lakhs on it from a
financial institution (Bank or NBFC) at interest rate of 7% for 20 years. Now
your monthly EMI would be around Rs 31,000 and you have to pay a total amount
of Rs 3,72,000 in first year, out of which Rs 2.77 lakhs is interest component
payment and Rs 95,000 is principal component amount. Suppose your annual
earning is Rs15 Lakhs annually, in that case you can claim Rs 95,000 (principal
payment) deduction under 80C (remaining Rs 55000 of 80C can be claimed from
stamp duty payment, valid for only first year), Rs 2,00,000 under section 24
and remaining Rs 77,000 interest amount under Section 80EEA.
So, first
year you can take tax deduction benefits of Rs 4.27 lakhs. Moreover, principal
and interest paid components against home loan EMIs change every year, so it is
suggested that check it in advance before you do your tax planning.
Tax benefits for second time home owner: If you already own a property and wish to buy
another then tax benefits under 80EEA cannot be claimed. In the above example
now you can claim Rs 95,000 under 80C (plus 55000 Rs. against stamp duty paid in first year) and
2,00,000 Rs. under Section 24. However, if the purpose of home is investment
and you want to lease it on rent, in that case you can claim full amount of
interest component in section 24, which is Rs 2.77 lakhs in above case.
If woman member of the family invests in house: As per income tax laws, there are no specific
benefits in case a woman invests in
house. She can claim all the above mentioned benefits under income tax laws
similar to man. However, some state governments have given 1%-2% benefit of
stamp duty if woman is the owner of house. Like in Rajasthan, if you buy a
house of amount Rs 40 Lakhs then in general case the stamp duty (including
other charges) is 8.8% which is Rs 3,52,000, but if any a female member of the
family buys this house then she has to pay 7.5% stamp duty, which is Rs
3,00,000. So, there is one-time saving of Rs 52,000 if a woman buys the same
house.
Tax benefits for husband-wife or joint purchase: If both husband and wife purchase house jointly,
the income tax benefit rules remain the same in that case, however, both
husband and wife can claim tax benefits in their individual files. Maximum
deductions benefits cannot cross the actual amount paid, i.e. both husband and
wife cannot take benefit of same payment. For example, the interest component is
Rs 2.77 Lakhs and husband has taken tax deduction benefit of Rs 2 Lakhs under
Section 24, then wife can only take benefit of Rs 77,000 under section 24,
benefit taken against interest component can never cross Rs 2.77 lakhs, which
is the actual paid amount. Similarly, Rs 95,000 is paid against principal
payment, so if they want to take benefit under Section 80C so either husband or
wife can take full benefit of Rs 95,000, if they want, they can split the
amount as per their tax planning, but full amount benefit cannot be taken in
both accounts.
Authored by - Ravi Signal, Vice Chairman, GCL
Securities Limited
Ravi Singhal
Vice Chairman, GCL Securities Ltd.
Mr. Singhal is working as Vice Chairman at GCL
Securities Ltd. After completing his education from Institute of Marketing
Technology, Gaziabad, he has moved with
a vision to be an entrepreneur. He is working with GCL since last 7 years and
manages overall research and operational activities. Earlier, he worked under
RMS as senior software engineer after gaining a rich experience of 5 years.