Maximize Home Loan Tax Benefits with Effective Tips and Tricks

These days, most home buyers avail themselves of a home loan to help them facilitate their property purchase. Home prices have increased significantly over the last few years and completing a property purchase without external financial assistance has become near impossible for most people. Home loans also offer the benefit of home loan tax deductions. Those repaying a home loan can claim tax benefits on the principal component of their home loan under Section 80C and on the interest component of their loan under Section 24b, Section 80EE and Section 80EEA of the Income Tax Act. The maximum home loan tax benefit that one can claim under Section 80C is Rs.1.5 Lakh and Rs.2 Lakh under Section 24b. Under Section 80EE, one can claim an additional Rs.50,000 and under Section 80EEA, an additional Rs.1.5 Lakh, provided one meets all the qualifying criteria. 

Let us now look at how home loan borrowers can maximize home loan tax benefits.

1. Home loan borrowers must know that they can claim tax benefits under Section 80C of the Income Tax Act. However, Section 80C deals with several different tax-saving options, such as PPF, ULIPs and ELSS. So, one must sit down with a tax expert and discuss if they should claim tax benefits on their home loan repayment or the other tax-saving options under this section of the Income Tax Act. All home loan borrowers must also keep in mind that home loan tax benefits under Section 80C are only available on ready-to-move-in properties. If you have invested in an under-construction property, know that you won't be able to claim tax benefits under Section 80C of your property. So, invest in other tax-saving options under Section 80C accordingly. Further, borrowers must also keep in mind that if they sell a property within 5 years of buying it, the tax benefit they had claimed under Section 80C gets reversed. 

2. Under Section 24b of the Income Tax Act, one can claim tax benefits on the interest component of one's home loan. These tax benefits are available on both under-construction and ready-to-move-in properties. However, this tax deduction automatically gets reduced to Rs.30,000 if the construction on the property is not completed within 5 years of availing of the loan. So, buyers must make sure to invest in properties from reliable builders and those who are known for honouring their deadlines. 

3. First-time home buyers can maximize their tax savings by claiming tax deductions on the interest component of their loan under Section 80EE and Section 80EEA. However, to be able to claim tax benefits under these sections, other conditions must be met. Home loan borrowers can sit with a home loan tax expert to develop a better understanding of these sections.

Also have a look at my other article how to save tax on home loan

Final Words 

Developing a staunch understanding of the various home loan tax benefits available to home loan borrowers under various sections of the Income Tax Act is one of the best ways to maximize one's home loan tax benefits. If you are repaying a home loan, either read about home loan tax benefits extensively or simply avail yourself of the services of a home loan tax expert.