Learn About Tax Exemptions on Home Loan

Learn About Tax Exemptions on Home Loan

To have your own home is the dream of every person. However, not many people are aware of the fact that your home loan can provide you tax benefits. This article will help in educating readers on what type of tax benefits can they expect from their home loan and ways to take maximum advantage of it.

What is making home loan so desirable among people?

Up to 85% of the total house property price can be issued in the form of a loan. Tax benefits have been the major attractive feature for people who are buying a property on house loan. This makes more and more people keen in taking a home loan.

Tax exemption rules pertaining to home loan

According to the 2018 budget, property owners that have rented accommodation can deduct a maximum interest of Rs 2 lakh p.a., after adjusting the amount of rent earned on the home loan.

Any amount more than Rs 2 lakh will be carried forward to be evaluated in the 8 assessment years. People who have got the same home and have taken a house loan are eligible for Rs two lakh deduction on the amount of interest paid towards the home loan.

If the house property is sold within three years of the date of purchase, then an individual will be required to pay the tax according to the slab rate. This is because the total profit earned on sale will be considered as “Capital Gains”.

If the house property is not acquired or completed within five years from the date of taking the loan, then an individual has the right to avail interest benefit of Rs 30,000.

What type of tax benefits can you expect from home loan?

Following are the tax benefits that can be claimed as “deductions” under relevant sections of IT Act

  • Tax benefit applicable on principal amount under section 80C states that a HUF (Hindu undivided family) or an Individual is eligible to avail tax benefits on the principal repayment amount of the home loan.
  • Registration charges and stamp duty are also entitled for
  • Life Insurance Premium, EPF, NSC, ELSS can be claimed with the home loan to get an overall deduction of 1 lakh rupees in a year.
  • Home renovations/additions or commercial property on existing property isn’t eligible under section 80C of IT Act.
  • The tax benefit applicable on home loan under section 80C is permitted post completion of house construction and issuance of the “Completion Certificate”.
  • Interest payment under section 24(b) can be availed on interest payable on the home loan that is taken for construction or purchase of a house.
  • Property owners of let out home can claim full amount of interest, but those who have self-occupied properties are eligible for exemption up to Rs. 1.50 lakhs p.a.
  • Loans taken from family and friends can be included to obtain tax benefits.


By being informed about the tax benefits, a taxpayer can claim additional benefits or extra exemptions as per the regulations stated by the ITD (Income Tax Department).


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