2 weeks Ago By Moneycontrol
Owning a home doesn't just offer long-term financial stability—it also brings powerful tax-saving opportunities. If you're servicing a home loan, both the principal and interest components of your EMI (Equated Monthly Instalment) can be used to reduce your taxable income under different sections of the Income Tax Act. Here's how you can optimise those benefits and make the most of your loan repayments.
Tax benefit on principal repayment under Section 80C One of the most straightforward ways to claim a deduction is under Section 80C, which allows you to deduct up to ₹1.5 lakh annually for principal repayments on your home loan. This section also includes other instruments like PPF, EPF, life insurance premiums, and ELSS, so your total claim under 80C is capped at ₹1.
5 lakh across all eligible avenues. To be eligible: Section 24(b) provides a separate deduction of up to ₹2 lakh per year on the interest portion of your home loan EMI. This is available only if the house is self-occupied.
If it's rented out, there is no cap on the interest deduction (though overall losses from house property are capped at ₹2 lakh in a financial year). To be eligible: If you're a first-time homebuyer, there’s additional room for savings: If you’ve taken a joint home loan (for example, with your spouse or parent) and you're both co-owners and co-borrowers, each borrower can independently claim deductions. That means each co-borrower may claim: When your house is under construction If your property is still under construction, you cannot claim Section 24(b) interest deductions until possession.
However, you can claim a pre-construction interest benefit, which allows you to deduct the interest paid during the construction phase in five equal instalments starting from the year of possession. Optimise your tax planning smartly To get the full benefit:.
