According to the provisions of the Income Tax Act of 1961, taking out a home loan can help applicants save money on taxes and even more so in light of the recent financial budget statements.

The government extended the additional tax deduction of 1.5 lakh on interest paid on housing loans to purchase affordable homes by one year in the Union Budget 2021, which was announced on 1st February 2021. As a result, borrowers can now deduct up to Rs. 3.5 lakh for a second mortgage until 31st March 2022.

This deduction is available under Section 80 EEA, which allows the borrower to deduct up to Rs. 1.5 lakh in interest on their house loan. These home loan tax benefits are in addition to the existing Section 24 (b) exemption of Rs. 2 lakh.

These home loan tax exemptions can only be claimed to purchase houses with a stamped value of up to Rs. 45 Lakh. Homeowners can claim the tax benefits on home loan availed till 31st March 2022. Thus, borrowers will be able to claim a maximum income tax deduction of Rs. 7 Lakhs.

Income tax benefits under Section 80 EEA are available to those availing of home loans under the PMAY CLSS scheme.

Sections of the Income Tax Act that provide tax rebate on home loan:

Sections in the IT Act

Nature of home loan deduction in Income Tax

Maximum amount deductible

Section 80C

Tax deductions on the principal repayment

Rs. 1.5 Lakh

Section 24

Tax deductions on the interest amount payable

Rs. 2 Lakh

Section 80EE

Additional home loan interest Tax benefit for first-time home buyers

Rs. 50,000

The process to claim tax benefits on a home loan is easy and simple.

1. Verify that the residential property is registered in their name. If the applicant is taking out a joint home loan, they should make sure that the person applying is a co-owner.

2. Calculate the total amount the borrower can claim as a tax deduction.

3. Hand over the home loan interest certificate to their employer so that he can adjust the TDS.

4. On failing to follow the above step, the borrower needs to file their IT returns.

5. In case the beneficiary is self-employed, they are not required to submit these documents anywhere. Just keep them handy in case the IT department raises queries in the future.

Armed with the information on how to claim tax benefits on a home loan, avail the facility from among the various HFC’s, as they offer a competitive home loan interest rate and tax benefits along with flexible loan tenure of up to 360 months and adequate sanction, making it ideal for their house buying needs in India. All the borrower has to do is meet the easy home loan eligibility criteria, apply online on their website, furnish essential documents, and await loan approval.