Taking a home loan can help you save tax| With Automated Income Tax Preparation Excel Based Software All in One for the All Government & Non-Government Employees for F.Y.2021-22

 Taking a home loan can help you save tax| The repayment of a Home Loan comprises 2 components:

1. Repayment of Principal and

2. Repayment of Interest

As the repayment comprises of two different components, the tax benefit on a home loan is governed by different sections of the Income Tax Act. Following are the benefits available on loan taken on House Property which can be claimed as deductions in the Income Tax Return: 

1. Deduction on Principal Repayment (U/s 80C): The amount paid as Repayment of Principal of Home Loan taken by an Individual/HUF is allowed as deduction u/s 80C. The maximum deduction allowed u/s 80C is Rs. 1,50,000. This deduction is available on a payment basis. But to claim this deduction, the house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to the total income in the year of sale. 

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2. Deduction for Stamp Duty and Registration Charges (u/s 80C): A deduction for stamp duty and registration charges paid on the purchase of house property can also be claimed u/s 80C but within the overall limit of Rs. 1,50,000. It can be claimed only in the year in which these expenses are incurred.

 

3. Deduction of interest on Home loan. As per Sec 24(B), the maximum deduction for Interest payable on the Loan is Rs. 2,00,000 where the loan has been taken on or after 01-04-1999 for the Purchase or Construction of a self-occupied property and the property has been acquired or constructed within 5 years from the year in which the loan was taken. The maximum tax deduction allowed u/s 24 of interest on the loan on a self-occupied property is Rs. 30,000 where the loan was taken before 01-04-1999 or the loan was taken for repair, renewal or reconstruction. There is no maximum limit in case the house property for which the Home Loan has been taken is not self-occupied and the taxpayer can take a deduction of the whole interest amount.

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4. Additional deduction of interest u/s 80EEA: Additional deduction of interest on home loans taken from any financial institution is available to individuals up to a maximum limit of Rs. 1,50,000 provided the following conditions are satisfied:

The stamp value of the property does not exceed Rs. 45 lacs.

The loan must have been sanctioned between 1st April 2019 to 31st    March 2021.

On the date of sanction of loan, the individual does not own any other residential house property. 

5. Additional deduction of interest u/s 80EE: 

Things to Remember

Section 80EE came into effect from the financial year 2013-14. It was available for only 2 years, FY 2013-14 and FY 2014-15. The deduction allowed earlier was limited to a maximum of Rs 1 lakh in total and was available for only 2 financial years.

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However, this section has been reintroduced, effective F.Y 2016-17 (A.Y 2017-18). Now the deduction is allowed for up to Rs. 50,000 per year until the loan is repaid. Additional deduction of interest on home loans taken from any financial institution is available to individuals up to a maximum limit of Rs. 50,000 provided Additional deduction of interest on home loan taken from any financial institution is available to individuals up to a maximum limit of Rs. 50,000 provided the following conditions are satisfied:

The value of residential house property does not exceed fifty lakh rupees.

The loan must have been sanctioned between 1st April 2016 to 31st March 2017.

The amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh rupees.

On the date of sanction of loan, the individual does not own any other residential house property.

Summary

Section	Nature	Maximum Deduction	Conditions
24	Interest	Rs. 2,00,000	Construction must be completed within 5 years from the end of FY in which loan was taken.
80C	Principal	Rs. 1,50,000	Property should not be sold within 5 years of possession.
80C	Stamp Duty	Rs. 1,50,000	The claim is allowed in the year of expense incurred.
80EE	Interest	Rs. 50,000	Property Value should not exceed Rs. 50 lakhs and the loan amount should not exceed Rs. 35 lakhs.
80EEA	Interest	Rs. 1,50,000	The stamp value of a property should not exceed Rs. 45 lakhs and deduction u/s 80EE must not be claimed.

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Housing loan and deduction of the principal of the interest portion | With Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10 E for the F.Y.2021-22

Housing loan and deduction of the principal of the interest portion. Tax benefits on housing. In this article, you can get full details of principal waiver of housing loan and its interest such as - waiver under section 80C (for repayment of principal only), full details of section 24 (for part of full interest), a summary of section 24 and 80 CCE Etc. Now you can scroll down to check out the full details of "Housing Loan and Principal's Discount on Interest"

  

Housing loan and its principal discount

Exemption U/s-80C (for payment of original principal only)

The main retaliatory element is Rs. 150,000 clubs can be set up in the total range of taxable devices eligible under Section 80C.

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Only available for purchase or construction of the residential property

Discounts are only available for self-occupied property.

 

This discount is available only on actual payment (i.e. on a cash basis and not on an earnings basis), so the paid EMI and the principal earned on the EMI are not eligible for the discount.

 

The tax exemption claimed would be reversed if the property was sold within 5 years of the year in which such the national property was acquired at the end of the financial year.

 

Section 24(B) (for interest only)

 Discounts are available on a consolidated basis.

The discount is available if the residential property is purchased / constructed / repaired / renovated / rebuilt.

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The annual interest component is Rs. 200,000 (Rs. 3,00,000 for senior citizens) can be claimed as a rebate against income. (If completed within 3 years from the end of F.Y, the discount will be reduced to Rs. 30,000 

 

There is no maximum limit unless the property is self-occupied.

Discounts under 80EE (Materials of interest only)

 

An additional tax deduction of Rs. 50,000 / - is available for first time home buyers in case of interest in home loans (Income Tax Act 91).

Terms & Conditions:

1) This is your first home purchase.

2) The value of this house is 40 lakh rupees or less.

3) The amount received for this house is Rs. 25 lakhs or less.

 4) It has also been approved by a financial institution

Summary of discounts for components of interest

Particulars	Self Occupied Property	Non-Self Occupied Property
Section 24	Rs 2,00,000	No Limit
Section 80 EE	Rs 1,00,000	Rs 1,00,000

Particulars	Section 24	Section 80C
Tax Deduction Allowed	Interest	Principal Amount
Basis Of Tax Deduction	Accrual Basis	Paid basis
Quantum	SOP=2,00,000 Non-SOP=No limit	Rs 1,50,000
Purpose Of Loan	Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.	Purchase / Construction of a new House Property
Eligibility of Claiming Tax deduction	Purchase/ Construction should be completed within 3 years	N/A
Restriction on sale of property	N/A	Tax Deduction claimed would be reversed if Property sold within 5 years

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