Owning a house is the one aspect of a happily settled life that everyone dreams of. The pride of being a house owner brings a sense of achievement as well as freedom of living. Freedom of living means one can design and decorate the house as he wishes. It does not doubt that this is a big decision in one’s life, but it provides multiple benefits in terms of home value appreciation, property tax deductions and loan interest deduction, etc. By home loan tax benefits, borrowers save a big amount of money every year.

Under the Income Tax Act of 1061, the government of India offers tax benefits on home loans. In the Union Budget 2021, the government has extended the additional tax deduction by one more year with Rs 1.5 lakh on interest paid on housing loans, which means the loan borrowers can get a deduction up to Rs 3.5 lakh till March 2022.

Here is the detailed information about tax deduction under various sections of income tax laws:

Under Section 80C:

The borrower can avail tax deduction on the amount of Rs 1, 50,000 paid as repayment of the principal amount, but with few conditions- It can be claimed only after the completion of the property; the loan borrowed must be used for the purchase or construction of the house; Deduction can be claimed after the principal amount is paid; the property can not be sold before the end of five years of possession.

Under Section 80EE:

Under this section, only first-time borrowers can avail tax benefits of an additional deduction of Rs 50,000 on payment of interest on home loans. The conditions are: It should be the first and only property of the borrower and there should be no other loan; the property value and loan amount should be 50 lakhs and 30 lakhs; the loan sanction date should be between April 1, 2016, and March 31, 2017.

Under Section 24:

This section allows a maximum deduction of up to Rs 2 lakhs for the property if the construction has finished within five years, if the construction has extended beyond five years Rs 30,000 can be claimed.

Tax benefit on Joint Home loan:

For a joint home loan, each borrower can claim a maximum of 2 lakhs on the interest paid and up to 1.5 lakh on the principal amount individually. With a combined income of a joint borrower, the eligibility will be higher.

Tax benefits on Second Home:

Under section 24, the home buyer can avail tax benefit on interest repayment under section 24(b) but the amount of deduction for both the properties cannot exceed the overall limit of Rs 2 lakh. From FY 2019-20, the notional rent on the second self-occupied property has been waived off.

Tax benefit for woman home-buyer:

There is no specific tax benefit for woman home-buyer but some states provide the concession in stamp duty if a woman is the owner of the house. Buying a house is beneficial as home-loan interest rates are low and there are several tax benefits too.