Buying a house is one of the crucial financial decisions you make in your life. Owning a home brings with it a sense of identity, status, and comfort. With the rising prices of property, financing your dream house from your savings is not a viable option as it puts a burden on your finances. However, another way to buy your preferred house without redeeming your savings or investments is by applying for a housing loan.
A home loan or housing loan is a secured loan that enables you to get up to 90% of the property’s value as a loan. You can avail of affordable interest rates and flexible loan tenures, giving you the flexibility to repay the loan amount without delays or defaults. Before opting for a housing loan, you must use a housing loan EMI calculator to determine how much you can afford to pay in EMIs based on your needs and preferences.
Tax benefits of taking a housing loan
Besides other benefits of taking a housing loan to buy your dream house, you can also avail multiple tax benefits under the Income Tax Act. To encourage citizens to invest in a house, the government of India has announced several tax benefits on home loan EMI payments.
On February 1, 2021, the government of India announced an additional tax deduction of Rs. 150,000/- on interest paid on housing loans for the purchase of affordable homes by one year. It means that you can get a deduction of up to Rs. 350,000/- for one year – until March 31, 2021. It is available under section 80 EEA.
It is worth noting that you can get these tax benefits if the stamped value of your property is up to Rs. 45,00,000/-. Also, the tax deductions under section 80 EEA are available to borrowers availing housing loans under the PMAY CLSS scheme.
Tax rebate under different sections of Income Tax Act 1961
| Section | Nature of home loan | Maximum amount deductible |
| Section 80 C | Deductions on the principal repayment | Up to Rs. 150,000/- |
| Section 24 | Deduction on the interest amount payable | Up to Rs. 200,000/- |
| Section 80 EEA | Additional interest tax benefit for first-time home buyers | Up to Rs. 50,000/- |
You need to make repayments of your housing loan in equated monthly instalments (EMIs). There are two main components of your EMIs – principal amount and interest rate. As a borrower, you can avail of tax benefits on both of these components.
- Tax deductions under section 80C
You can get a maximum tax benefit of up to Rs. 150,000/- on the principal repayment.
It includes both stamp duty and registration charges.
- Tax deductions under section 24
You can claim up to Rs. 200,000/- of tax benefits on the interest amount payable.
You can avail of this benefit if the construction is finished within five years. Or else, you can only claim tax deductions up to Rs. 30,000/-
- Tax deductions under section 80 EEA
As a first-time homebuyer, you can get tax deductions of up to Rs. 50,000/- on the interest amount payable.
Your home loan amount must be Rs. 3500,000/- or less.
Your property’s value should not exceed Rs. 50,00,000/-.
In short
Opting for a housing loan can get you tax benefits, due to which you can significantly cut the total cost of borrowing. However, before applying for a home loan, it would be wise to use your lender’s housing loan EMI calculator to determine your EMI affordability.
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