Ask for money today: What is the maximum tax benefit I can claim on a home loan?

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I took a home loan of Rs 40 lakh. How many tax advantages can I take advantage of for the mortgage? Am I eligible for Affordable Housing Benefits?

Rahul Gupta

By Sujit Bangar, founder of Taxbuddy

The EMI on home loan includes the principle and interest. You can get a tax benefit for both. First, the main component of the EMI paid in the year can be deducted under Section 80C of the Income Tax Act. The maximum limit is Rs 1.5 lakh.

Second, you can take advantage of two other interest deductions that are part of the EMI. The deduction for the interest portion of the EMI is mostly missed by taxpayers. The main reason is the lack of knowledge about the exact deductions that can be claimed.

A. You can avail interest deduction under Section 24B of the Income Tax Act to the extent of Rs 2 lakh. This limit of Rs 2 lakh is for self-occupied property. This means that if the property has not been let, one can claim an interest deduction to the extent of Rs 2 lakhs.

In case of rented property, this limit of Rs 2 lakh is not there. If you have put a property up for rent, this deduction can also be availed at over Rs 2 lakh.

B. You can also claim a deduction under Section 80EEA up to Rs 1.5 lakhs against payment of interest on the home loan, provided the following conditions are met

– You must be a first-time home buyer (i.e. you must not own property)
– The stamp duty value of the property must not exceed Rs 45 lakhs
– The housing loan must be contracted with banks / financial institutions

It looks like your property value is less than Rs 45 lakh. Hence, you can also claim deduction under Section 80EEA up to Rs. 1.5 Lakhs against payment of interest on home loan.

(The opinions expressed by the investment expert are his own. Email us your investment questions at [email protected] We will answer your questions from our panel of experts)

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