What Are the Home Loan Tax Benefits in 2022: All You Need to Know
Almost everyone dreams of owning a house. However, everyone does not have adequate resources to buy one instantly. While some save money, most people apply for a home loan.
A home loan includes the principal repayment and the interest amount. Both the interest and the principal amount qualify for tax deductions. Under the Income Tax Act of 1961, the Indian government offers various tax benefits on home loans. Hence, if you are planning to buy or build a house, you should know the home loan tax benefits provided by the government.
Home loan tax benefits in 2022
The tax benefits that apply to various types of home loans in 2022 are as follows.
Home loan tax benefits under Section 80C: Repayment of the principal amount
You can avail of a maximum deduction of Rs 1,50,000 each year on the principal repayment portion of your home loan EMI. This income tax benefit applies to both rental and self-occupied properties.
You can claim the stamp duty and registration fees once and only in the same financial year. The total deduction cannot exceed Rs. 1,50,000 per year under Section 80C. Furthermore, you must have a fully constructed property to claim this home loan tax benefit.
You cannot avail of this benefit if you sell your property within five years of possession. All tax deductions claimed will be reversed if you sell your home before five years. Furthermore, the sale amount will be added to your income.
Home loan tax benefits on interest payments under Section 24
Under Section 24(b) of the Income Tax Act, you can claim a tax benefit on the interest you pay on the housing loan.
In the case of a self-occupied house, you can avail of a deduction of up to Rs. 2,00,000 on the payable interest amount. If you own two houses, the aggregate tax deduction cannot cross Rs. 2,00,000 per year.
If you have rented out your property, you can claim the total interest you are entitled to pay on your housing loan for construction, purchase, repair, reconstruction, or renewal as a tax deduction.
However, under the Income from House Property Act, the loss adjusted against income cannot be more than Rs. 2,00,000. You can carry forward the remaining loss amount for eight years to accommodate the loss against the income accrued from the house property only.
Only the home loans sanctioned on or after 1st April 1999 are eligible for these deductions.
If you purchased a property still under construction and are paying EMIs, you can claim the interest payable on your home loan as a deduction once construction is complete.
The Income Tax Act of 1961 allows you to claim a deduction of the interest payable during and after construction. The interest payable during the pre-construction period can be given as a deduction in five equal annual instalments. These instalments start only after construction is complete.
Home loan tax benefits under Section 80 EEA: Interest on home loans for first-time buyers
The interest amount you need to pay on your home loan is also liable for an extra deduction. A maximum of Rs. 1,50,000 can be deducted. However, to be eligible for this home loan tax benefit under Section 80 EEA, you need to fill in the following criteria:
- To purchase a residential home, you should borrow your home loan either from a housing finance company or a financial institution.
- Only the loans approved between 1st April 2019 and 31st March 2022 are eligible.
- The housing property stamp duty cost should be less than Rs. 45,00,000.
- The taxpayer must be a first-time buyer.
- If you and your partner own the housing property together and contribute towards the loan repayment, both are eligible to claim deductions.
- Both resident and non-resident owners can claim home loan tax benefits under Section 80 EEA.
Since the 2022 budget has not extended the deduction benefit available under Section 80 EEA, individuals taking a housing loan on or after 1st April 2022 will not be eligible for this benefit.
Home loan tax benefits under Section 80C and Section 24: Joint home loans on the principal amount and interest payment
If you have applied for a housing loan with a spouse or partner, both can avail of a deduction of up to Rs. 2,00,000 on the housing loan interest payments under Section 24(b). Each party can also claim a deduction of up to Rs. 1,50,000 on the principal repayment amount under Section 80C.
In this case, the tax benefit is doubled compared to the benefits available for a loan taken by a single party.
However, to be eligible for this home loan tax benefit, both parties must be co-owners and should pay their EMI payments without fail.
Home loan tax benefits under Section 80EE
Under Section 80EE, first-time buyers can avail of a maximum deduction of Rs. 50,000 on the payable interest payable on their home loan in the following cases:
- The monetary value of the acquired property is not above Rs. 50,00,000, and the loan amount is at most Rs. 35,00,000.
- The home loan should have been approved between 1st April 2016 and 31st March 2017.
- You can benefit from the advantage offered by this deduction till the repayment of the loan continues.
This deduction has been made accessible from FY 2016-17 and is still in effect.
Conclusion
You can easily own your dream home with the help of a housing loan. Although a home loan can be an additional burden, you can somewhat lessen its weight by availing of the various government-backed home loan tax benefits. Contact a financial expert if you do not understand the various tax benefits or the details of tax deductions.
You can now transform your dream of owning a house into a reality with the different types of home loan options provided by Piramal Finance. Piramal Finance is a housing finance company registered with the National Housing Bank (NHB) and provides retail and wholesale funding opportunities across sectors.
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