All you need to know about tax saving on home loans


There are so many wonderful reasons to buy a house! You get to live in a place you can truly call your own, paint the walls with your creativity, and form lasting relationships with a wonderful community. But do you know another huge advantage of buying a house in India today? Tax rebate on home loans. 

That’s right. The government is actively trying to encourage more and more citizens to buy houses and when you do, you get rewarded with huge tax breaks. Under Section 80C of the Income Tax Act and new GST rules, you’re eligible for tax deductions under various clauses. Let’s look at each one of them in detail. 

1. Deduction on housing loan interest:

If you have taken a home loan to either buy or construct a house, then you are eligible for a tax deduction on the interest payable on the loan. If you’re paying back your loan in EMI, there are two components to this payment – A principal amount and an interest. This interest will be deducted under tax upto a maximum of Rs. 2.5 LAKHS. You can start claiming this interest starting from the year your house is finally bought or constructed. 

2. Deduction on housing loan interest during pre-construction:

Suppose you have bought a house under construction and you’ll take some time to move in. But you’ve already taken a home loan and have started paying the EMIs, even before the house is fully completed. Will you still be eligible for interest deductions under the current laws? Yes, you will. The Income Tax Act makes special provisions in this case, wherein you can get a tax rebate on home loan for up to Rs. 2 Lakh for pre-construction interest amounts. This interest is deducted under the provision in five equal installments. However, in this case, too, 2 lakhs is the upper limit. 

3. Deduction on principal amount:

Under Section 80C of the Income Tax Act, as mentioned above, you’re not only eligible for a tax deduction on the loan interest amount but also on the principal amount. This way, people are more incentivized to invest in a new home. Under this provision, you’re eligible for a reduction of up to Rs. 1.5 lakhs per year. One condition that applies to avail housing loan tax benefits here is that you should not sell the house upto at least 5 years. If so, you’ll become ineligible and will be taxed for the same. It’ll jump right back to your income and you get no benefits. 

4. Deduction on joint home loan:

Joint home loans have become very popular in the last few years. With earnings being more and more equally split between both spouses, it’s a very good idea to opt for a joint home loan for a new house. Under this provision, each partner can claim up to Rs.2 lakhs each on interest and up to 1.5 lakhs each on the principal amount and get a home loan tax exemption. However, both partners need to be co-owners of the property. Deduction on joint home loans is very advantageous for families who want to buy a new house. You save a lot more when you take a joint home loan. 

5. Deduction for registration charges and stamp duty:

You can claim these charges only in the year in which you have taken a loan. You can get a tax deduction of upto 1.5 lakh under this scheme. If a property is purchased jointly, the co-owners can claim these expenses in proportion of their share in the property.

6. Section 80EEA – Additional deduction:

If the stamp value of your home does not exceed Rs.45 lakh, then you are eligible for tax rebate on home loan under Section 80EEA of the Income Tax Act. The loan must be sanctioned between 1st April and 31st March and is deductible upto Rs.1.5 lakh. Also, you should not own any other house at the time of loan sanctioning. You should also be ineligible for tax deduction under section 80EE. 

These are the main tax benefits you can avail when you buy a new house. Isn’t that great? Not only do you have access to affordable home loan offers, but also have great housing loan tax benefits to invest in a new property.  With all these benefits at your disposal, buying a house at a younger age will provide you with the much needed stable financial security in today’s volatile market. 

Furthermore, the Pradhan Mantri Awas Yojn or PMAY, launched by the government in 2015 seeks to incentivize greater investment in the housing sector by providing financial assistance to potential home buyers from the central government. Several banks and lending institutions have also leveraged PMAY to make housing more affordable to Indians. 

At The Wadhwa Group, we offer a wide range of homes with the best amenities across top residential locations in Mumbai. Our access to the best resources, transparency, and timely deliverance on promises ensures that you get the best home buying experience. With our support and guidance, buy your dream Wadhwa home with us at very exciting prices and avail unmissable tax incentives today! 


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