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Buying a Home Under 45 Lakh? Know the Tax Benefits on Home Loan

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The Union Budget 2021 extended tax deduction for affordable home loan borrowers. Under Section 80EEA, these individuals were allowed to claim a deduction of up to Rs.1.5 lakh on housing loan interest payments. This deduction is over and above the tax reprieve under Section 80C and Section 24(b). Thus, with the reasonable home loan interest rates at present, first-time homebuyers stand to save significantly through these tax reprieves.

Various provisions for home loan tax deductions

When speaking of tax benefits on home loan, especially on affordable homes, borrowers should know of the following three provisions – 

  • Benefit under Section 24(b)

Home loan borrowers can claim an income tax deduction as high as Rs.2 lakh based on their housing loan interest payment in that fiscal year under this section. However, this tax rebate under Section 24(b) is only applicable if the property construction is completed within 5 years. Otherwise, one would be able to claim only up to Rs.30000 under this specific provision.

These are some of the home loan tax exemptions and benefits every new and existing borrower should know. Even if one is unhappy with current home loan interest rates, such a facility allows for savings based on the amount of interest borne on a housing loan.

  • Benefit under Section 80C

According to Section 80C, home loan borrowers are liable to avail deductions as much as Rs.1.5 lakh per fiscal on the principal repayment portion of their smartfi home loans. Another important factor to note here is that stamp duty and registration charges can be clubbed into this for an increased deduction. Nevertheless, this can be done only in a single fiscal.

  • Benefit under Section 80EEA

It is a specific provision of tax savings for owners of affordable housing. As stated previously, one can claim deductions of up to Rs.1.5 lakh on housing loan interest liabilities. It is an additional deduction, which is not included in the Rs.2 lakh reprieve under Section 24. However, to be eligible for Section 80EEA benefits, one has to fulfil the following criteria – 

  1. Taxpayers must be first-time homeowners.
  2. The stamp value of the concerned property cannot exceed Rs.45 lakh.
  3. A housing loan must be availed from a recognised housing finance company or other financial institution.

Additionally, the property in question must meet certain criteria before owners can claim Section 80EEA benefits. These conditions are – 

  1. The house’s carpet area cannot exceed 645 square feet in metropolitan cities, such as Chennai, Kolkata, Hyderabad, Bengaluru, and more. However, in towns and villages, the dimension can range up to 968 square feet.
  2. Only affordable housing projects approved after September 2019 are eligible for Section 80EEA benefits.

Thus, with this provision, borrowers can reduce the home loan interest rate burden further. To minimise interest liabilities, borrowers must also consider the various factors that impact home loan interest rate. For instance, individuals maintaining a significant credit score of 750 or higher can often acquire such credit at affordable rates.

These individuals can also take advantage of pre-approved offers to enjoy a streamlined loan application. These offers are available on loan against property, home loan, and other products. You can check your pre-approved offer by uploading your full name and phone number.

With attractive rates and beneficial tax deductions, home loan borrowers can restrict financial strain considerably. However, knowing each provision in detail is necessary.


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