A very important criterion to be kept in mind while taking a home loan is the Tax benefit on home loan. To explain the tax benefit on home loan, we would be dividing the repayment of home loan into 2 components.

A very important criterion to be kept in mind while taking a home loan is the Tax benefit on home loan. To explain the tax benefit on home loan, we would be dividing the repayment of home loan into 2 components.

Repayment of the Principal Amount

Repayment of the interest on Home loan
SECTION 80C -Under section 80c of the income tax act, one can avail tax benefits on principal amount of the home loan. Maximum deduction allowed is Rs.1,50,000. The tax deduction is on the payment basis irrespective of the year for which the payment has been made. The amount paid towards stamp duty charges and registration fees is allowed for deduction under section 80C. Tax benefit for repayment of principal loan amount is allowed after the construction of the house is complete.

SECTION 24 - Tax is available on the interest that is paid towards the home loan under section 24. The tax is deducted on an accrual basis. Maximum tax deduction allowed under section 24 is Rs.2lakh. This can be claimed on yearly basis even if no payments have been made during that year. If the house is not constructed within 3 years from the end of the financial year that loan was taken and allowed to claim only Rs.30000 as deduction.

If loan is taken to repair, reconstruct or renew your house, then you won't get any tax deductions on the interest paid. If the interest for the loan taken to purchase or construct the house has been paid before the house has been completed, then the aggregate of the amount is allowed for deduction in 5 equal instalments for 5 successive financial years.

Section 80EE tax benefit on interest paid on home loan for first time buyers. This deduction would be allowed only if the value of the property purchased is less than Rs.50lakhs and the value of loan taken is less than Rs.35lakhs. The loan should be sanctioned between 1st April 2016 and 31st March 2017. The benefit of this deduction would be available till the time the repayment of the loan continues. This deduction would be available till the time the repayment of loan continues. This deduction would be available from Financial year 2016 - 2017 onwards.

TO CLAIM TAX BENEFITS

The tax benefits have to be claimed at the time of filing your return if you have not informed. Deduction under section 80C. Here the taxpayer has to enter the contribution he has made towards PPF, EPF, LIC Premiums paid and the principal repayment made towards the home loan. Please note that if you are selling the property before 5 years from the date of getting possession, then the deductions claimed under section 80 C for principal repayment will be added back to your income.

Deduction under section 24, this deduction is for those who are buying a house for the very first time.

Deduction for interest earned on SB account under section 80TTA.
Deduction under section 80G that includes donations made to charitable organizations.

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