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IN Tax 2024

Housing Loan Interest and Income Tax Deductions in India

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For many, buying a home is a significant milestone, and a housing loan often becomes a necessity to achieve this dream. However, the silver lining is that the Indian Income Tax Act offers some relief to homeowners repaying housing loans, specifically on the interest amount paid. Here, we will delve into the intricacies of how housing loan interest affects income tax deductions and allowances in India.

Sections Dealing with Housing Loan Interest

There are primarily three sections under the Income Tax Act, 1961, which provide tax relief on housing loans. They are:

  • Section 24
  • Section 80C
  • Section 80EEA

Section 24: Income from House Property

This section provides a deduction on the interest paid on a home loan for a self-occupied or let-out property. The deduction amount is capped at ₹2,00,000 per annum for self-occupied properties. For let-out properties, there is no upper limit on the interest amount that can be claimed as a deduction.

Deductible Interest = Interest Paid on Loan - 30% of Net Annual Value

Where:

  1. Interest Paid on Loan: The amount of interest you pay during the financial year on your home loan.
  2. Net Annual Value: Gross Annual Value - Municipal Taxes

Section 80C: Principal Repayment

Under this section, the principal amount repaid for the housing loan is eligible for a deduction up to ₹1,50,000 per annum. This amount is within the overall limit of ₹1,50,000 allowed under Section 80C for various investments and expenses.

Section 80EEA: Additional Deduction

This section was introduced to provide an additional deduction of ₹1,50,000 on interest repayment for homebuyers purchasing affordable homes. However, to avail this, the stamp duty value of the property must not exceed ₹45 lakh.

Who Can Avail These Benefits?

These tax benefits are available to both resident and non-resident Indians. However, the property should be in India. Also, both co-owners and co-borrowers of the loan can claim these benefits independently, based on their share of the loan repayment.

Documentation Required

To claim these deductions, one must provide:

  1. Home Loan Statement from the lender
  2. Proof of property ownership
  3. Completion certificate for the property, if applicable