Maximizing Housing Loan Tax Benefits: A Comprehensive Guide

Home loans offer several advantages. However, the biggest advantage is that they make one eligible for a variety of housing loan tax benefits. Under Section 24b of the Income Tax Act, one can claim tax benefits up to a limit of Rs.2 Lakh on payments made towards the repayment of the interest component of a home loan. Under Section 80C, the maximum limit specified is Rs.1.5 Lakh and this limit applies to payments made towards principal component repayment. Over and above this, borrowers can also claim housing loan tax benefits under Section 80EE and Section 80EEA up to a maximum of Rs.50,000 and Rs.1,50,000 provided they meet the pre-defined conditions that make one eligible for housing loan tax benefits under these sections of the ITA. 

Now that we are familiar with the basics of housing loan tax benefits available under various sections of the ITA, let us look at how to maximize housing loan tax benefits. 

Simple Tips on How to Maximize Housing Loan Tax Benefits 

1. Avail Yourself of a Joint Home Loan 

If you decide to avail yourself of a joint home loan, both you and your co-borrower can claim tax benefits separately under Section 80C and Section 24b of the Income Tax Act. Married people should always co-borrow a home loan as doing so allows them to maximize tax benefits available to them from Rs.3.5 Lakh to Rs.7 Lakh per annum by claiming housing loan tax benefits separately under Section 24b and Section 80C of the Income Tax Act. Individuals can also co-borrow a home loan with their parents and claim tax benefits separately.

2. Claim Tax Benefit on the Interest Paid During the Pre-Construction Phase 

If you have invested in an under-construction property, know that you can increase the housing loan tax benefits available to you by claiming a tax deduction on the interest paid during the pre-construction phase. One can claim a tax deduction on pre-construction interest in five equal instalments spread over five years. 

3. Check if You Are Eligible to Claim Tax Benefit Under Section 80EEA

Section 80EEA is an upgrade of Section 80EE. Under Section 80EEA of the Income Tax Act, housing loan borrowers and first-time homeowners who have availed of a housing loan between April 1, 2019, and March 31, 2022, can claim tax benefits up to a maximum of Rs.1.5 Lakh provided they meet certain other conditions as well. For starters, the stamp duty value of the home should be no more than Rs.45 Lakh and the individual claiming deduction under Section 80EEA must not be eligible to claim tax deduction under Section Section 80EE. Further, the carpet area of the property should be no more than 60 square meters if the property is located in a metropolitan city and no more than 90 square meters if the property is located in any other city.

4. Claim Additional Tax Benefits on Your Top-Up Loan

Lastly, housing loan borrowers can also increase the housing loan tax benefits available to them by availing of a top-up loan on their home loan. If one avails themselves of a top-up loan and uses the money to buy another property, they become eligible to claim tax benefits under Section 24b of the Income Tax Act on the interest component of their top-up loan. 

So, these are some simple things housing loan borrowers can do to maximize the tax benefits available to them.