Home Loan Income Tax Benefits In 2021

If you are currently paying off a home loan or if you have just taken out a home loan, you may be eligible for certain tax advantages on the equivalent monthly installments (EMIs) that you have paid.

In addition to the tax breaks announced in previous budgets, there are additional tax breaks that are still in effect for fiscal years 2021-22.

Here’s a look at all of the tax breaks that a person may take advantage of while making house loan EMI payments if they choose to use the previous tax code.

Deduction for the principal amount of a house loan that has been repaid

The EMI that you pay is made up of two parts- the principal repayment and the interest paid. Concerning the self-occupied property, you may be eligible to claim a deduction under Section 80C of the Income-tax Act, 1961 for the amount you paid as the main component of the EMI.

 Keep in mind that if you own a second home that is either vacant or in which your parents are residing, that second home will be treated as a self-occupied residence for tax purposes.

 It is also possible to claim a deduction under Section 80C for the stamp duty and registration fees that were paid at the time of purchasing a home.

Deduction for interest paid on a mortgage or other secured loan

An individual may claim a deduction for the interest paid on a house loan in addition to a deduction for the principal amount returned on the loan. The deduction for interest paid on a house loan is allowed under Section 24 for a maximum of Rs 2 lakh in a particular financial year when the property is used for self-improvement or rental purposes.

 In the event of a self-occupied property, any interest payments in excess of Rs 2 lakh will not be carried forward and will not be offset against any other income category such as capital gains, wages, or any other kind of income.

 If you own two homes and your second home is either vacant or inhabited by your parents, the interest paid on the home loan for the second home will be covered under Section 24 of the Internal Revenue Code as well. Keep in mind that the total deduction allowed on interest paid on home loans for both homes cannot exceed Rs 2 lakh in a single financial year, regardless of the number of properties.

Additional tax deductions when purchasing a modest-priced home.

Suppose you have purchased a property that falls within the affordable housing category. In that case, you may be eligible for an extra deduction for the interest paid on the home loan used to purchase the home. 

In accordance with Section 80EEA, a maximum of Rs 1.5 lakh may be claimed as a deduction in a single financial year. It is available in addition to the deduction under Section 24 for a total of up to Rs 2 lakh in value. An individual who purchases real estate within his or her means may be eligible to claim a deduction of up to Rs 3.5 lakh in a single financial year.

 Always remember that the same sum cannot be claimed twice under two separate provisions of the tax code. For example, if you have paid Rs 1.4 lakh in interest on a house loan during the financial year, you may claim a deduction under either Section 24 or Section 80EEA of the Income Tax Act.

There are a number of requirements that must be met in order to make a claim, the most important of which are as follows:

• The home loan must be obtained from a financial institution such as a bank or a housing finance company for the purpose of purchasing a residential house property;
• The home loan must be obtained between April 1, 2019, and March 31, 2021
• The stamp duty on the house property must not exceed Rs 45 lakh
• The taxpayer must not own any residential property as of the date on which the loan is sanctioned
• The taxpayer must not be eligible to claim deduction under the existing sec.

Deduction under Section 80EE of the Internal Revenue Code

 People who took out a house loan during the fiscal year 2016-17 were eligible to claim an extra tax deduction of up to Rs 50,000 under Section 80EE of the Income Tax Act. Section 24 of the Indian Income Tax Act allows a house loan borrower who pays interest on their loan to claim a deduction for the interest paid on his or her gross total income up to a maximum of Rs 2 lakh per year. The deduction of Rs 50,000, implemented in Budget 2016, is in excess of the Rs 2 lakh maximum set by the government.

Several criteria must be fulfilled in order to be eligible for this deduction. These conditions are as follows:

a) The extra deduction for interest on a loan will only be applied to residential property and will not be applicable to commercial property.

b)It is exclusively available to first-time homebuyers.

c) The highest extra benefit is Rs 50,000 per year, with no upper limit.

d) The valuation of the home for which the loan is being obtained cannot be more than Rs 50 lakh.

e) The loan amount cannot be more than Rs 35 lakh in total.

f) The loan must be sanctioned between April 1, 2016, and March 31, 2017; otherwise, it will not be approved.

However, if you have previously taken out a house loan during the fiscal year 2016-17, you may claim this deduction until you have completely repaid the loan. This deduction is not available for new home loans taken after April 1, 2017.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.