The popularity of home finance has increased significantly over the past few years. Several key reasons can be attributed to the growing popularity of home loans. First, home loans make it possible for middle-class and salaried individuals to purchase a home, which may not be feasible without external financial assistance, especially now when the property prices in the majority of cities have witnessed a steep increase.

Second, home loans allow buyers to maintain liquidity and financial readiness for an emergency. Lastly, home loans allow borrowers to claim home loan tax benefits and reduce their tax liability significantly through the tenor of their loan. Housing loan interest deductions alone can help one reduce their tax liability by up to Rs.5 Lakh per year. 

This article focuses on housing loan interest deductions and how to maximize them. So, read on if you are currently repaying a home loan or are planning to avail yourself of one.

Home Loan Interest Deduction Under Section 24b 

Section 24b of the Income Tax Act deals only with tax deductions available on the interest component of one's home loan. The maximum home loan tax benefit limit is capped at Rs.2 Lakh under this section. 

Home loan borrowers can claim tax benefits on more than one home loan. However, the maximum limit permissible, irrespective of the number of home loans one has, is capped at Rs.2 Lakh. However, this limit applies only to self-occupied homes. In the case of rented-out properties, there is no upper limit on the tax benefit that one can claim under Section 24b. 

In the case of under-construction properties, borrowers can claim a housing loan interest deduction under Section 24b only after the construction on the property is complete. One can claim this deduction in five equal instalments spread over five years after the construction on the property is complete. 

Further, individuals who have availed of a joint home loan can maximize home loan tax benefits by claiming interest deductions separately under Section 24b. 

Housing Loan Interest Deduction Under Section 80EE

First-time homebuyers can claim an additional tax benefit up to a maximum of Rs.50,000 provided they meet the following conditions: 

1. The home loan value must not exceed Rs.35 Lakh and the value of the home bought with the loan money must not exceed Rs.50 Lakh. 
2. The borrower must have availed of a home loan between April 1, 2016 and March 31, 2017. 
3. The loan borrower must have had no other property in their name at the time of applying for the loan.

Housing Loan Deduction Under Section 80EEA 

First-time homebuyers who are not eligible to claim housing loan interest deduction under Section 80EE can claim tax benefits up to a maximum of Rs.1.5 Lakh provided they meet the following conditions:

1. The stamp duty value of the property bought with the loan money must not exceed Rs.45 Lakh. 
2. The individual availing of benefits under this section must have availed of a housing loan between April 1, 2019 and March 31, 2022. 
3. They must not be eligible to claim tax deduction under Section 80EE. 
4. The individual claiming housing loan interest deduction must have had no other property in their name at the time of applying for the home loan.
5. In the case of joint home loans and jointly-owned homes, all the individuals who had applied for a home loan can claim home loan tax benefits separately under this Section of the Income Tax Act. 
6. Tax benefits under this section are available for both self-occupied and rented-out properties. 

Final Words 

If planned well, a home loan can make an individual eligible for tax benefits up to Rs.5 Lakh or more. Joint home loans most certainly have added benefits and therefore, one must give preference to these loans. More importantly, borrowers opting for a home loan must aim to secure the lowest home loan rates. 

Doing so would help them get better home loan ROI or a better return on their investment. It will also allow them to repay their home loan quickly through affordable and easy-to-pay home loan EMIs. Get an idea of the home loan rates in India and negotiate for the best home loan deal you can get. Lastly, keep all the home loan documents ready to experience a hassle-free and smooth loan application process.