I have taken a home loan of Rs 40 lakh. How much total tax benefits can I avail against the home loan? Am I eligible for benefits under affordable housing?
Rahul Gupta
By Sujit Bangar, Founder Taxbuddy
The EMI on home loan comprises of principle and interest. You can avail tax benefit for both. First, the principle component of EMI paid in the year can be claimed as deduction under section 80C of the Income Tax Act. The maximum limit is Rs 1.5 lakh.
Second, you can avail two more deductions for interest part of EMI. The deduction on account of interest part of EMI is mostly missed by taxpayers. Major reason is lack of awareness about exact deductions which can be claimed.
A. You can avail interest deduction under section 24B of income tax act to the extent of Rs 2 lakh. This limit of Rs 2 lakh is for self occupied property. This means if property has not been rented out, one can claim interest deduction to the extent of Rs 2 lakhs.
In case of let out property this limit of Rs 2 lakh is not there. If you have put property on rent, then this deduction can be availed more than Rs 2 lakh also.
B. You can also claim deduction under section 80EEA upto Rs 1.5 lakhs against the payment of interest on home loan, provided following conditions are satisfied
- You should be first time home buyer (i.e. you shouldn't own any property) - Stamp duty value of the property should not exceed Rs 45 lakhs - Housing loan should be taken from banks/ financial institution
It appears your property value is less than Rs 45 lakh. Therefore, you can also claim deduction under section 80EEA upto Rs. 1.5 Lakhs against the payment of interest on home loan.
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