Home Loan Income Tax Benefits FY 25-26 – Calculator | Eligibility | Limits

Owning a home is a significant milestone, and the Indian government has made it financially rewarding by offering several home loan income tax benefits. If you’re planning to purchase a home or already have a home loan, you can avail of various tax deductions under different sections of the Income Tax Act, of 1961.

This blog will provide an in-depth, systematic, and detailed guide on home loan tax benefits for FY 2024-25, along with eligibility criteria, limits, deductions, and a calculator to help you maximize your tax savings.

1. Understanding Home Loan Income Tax Benefits FY 24-25

When you take a home loan, your monthly EMI (Equated Monthly Installment) consists of two components:

• Principal Repayment
• Interest Payment

The government offers tax benefits on both under different sections of the Income Tax Act. Below, we’ll explore these benefits in detail.

2. Home Loan Income Tax Benefits Under Different Sections

a) Tax Deduction on Home Loan Interest – Section 24(b)

Section 24 of the Income Tax Act allows a deduction of up to ₹2 lakh per year on the interest paid on a home loan if:

• The property is self-occupied.
• The loan is taken for purchase/construction.
• The construction is completed within 5 years.

For let-out properties, there is no upper limit on the interest deduction.

b) Tax Benefit on Principal Repayment – Section 80C

Under Section 80C, the principal component of your EMI is eligible for tax deduction up to ₹1.5 lakh per year.

Key conditions:

• The property must not be sold within 5 years of purchase.
• Registration and stamp duty charges can also be claimed under Section 80C.

c) Additional Tax Benefit for First-Time Home Buyers

First-time homebuyers get extra benefits under the following sections:

d) Home Loan Tax Benefit Before Possession

If your home loan is taken for under-construction property, you cannot claim tax benefits until possession. However, interest paid during this period can be claimed in 5 equal installments after possession under Section 24(b).

3. How to Calculate Home Loan Income Tax Benefits?

To estimate your tax savings, you can use a Home Loan Income Tax Calculator. The formula for tax deduction is:

Formula for Tax Deduction on Home Loan Interest

Here’s an example:

4. How to Declare a Home Loan in Income Tax?

To claim home loan tax benefits, you need to follow these steps:

1. Collect Interest Certificate from your bank.
2. Fill details in the relevant ITR form.
3. Submit Home Loan Documents:
   • Loan sanction letter
   • Completion certificate (for new homes)
   • Proof of interest and principal repayment

5. Home Loan Foreclosure Charges – Are They Tax Deductible?

Home loan foreclosure charges are penalties levied when you prepay your loan before the tenure ends. These charges are NOT tax-deductible under any section.

6. How Much Tax Benefit Can I Get on a Home Loan?

The maximum tax benefit varies based on loan components:

7. Is It Good to Buy a House to Save Taxes?

Buying a house only for tax benefits is not recommended. However, if you need a home and want to reduce your taxable income, a home loan is a great option.

8. How to Save Maximum Tax on a Home Loan?

To maximize tax savings:

• Opt for joint home loans to claim deductions separately.
• Invest in an under-construction property (claim interest post-possession).
• Use a home loan tax benefit calculator to plan tax savings.

Conclusion

Buying a home is not just an investment; it’s an opportunity to reduce tax liabilities significantly. By strategically using home loan income tax benefits, you can maximize savings while fulfilling your dream of homeownership.

At Housiey, we help homebuyers make informed decisions. If you’re planning to rent a property in Maharashtra.

 Don’t forget to check out our detailed guide on Stamp Duty on Rent Agreement in Maharashtra.

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