1. Section 80C:
You can claim tax deduction up to Rs 1.5 lakh under Section 80C for repayment of the principal component of a home loan, availed for purchase or construction of the residential property. Remember that construction of property must be completed within 5 years from the end of the financial year in which the loan was taken. Also, if the property is transferred or sold within 5 years, tax deductions claimed so far would be reversed, i.e. added back to your income in the year of sale, and then taxed according to your tax slab.
2. Section 24b:
Interest repaid on a home loan is classified in two categories i.e. interest pertaining to the pre-construction and post-construction period. As far as interest paid in the post-construction period for the self-occupied property is concerned, tax deduction up to Rs 2 lakh can be claimed under Section 24b of the Income Tax Act. In case of a let-out property, there is no upper limit for claiming interest deduction. Remember that this deduction can only be claimed from the year in which construction of the house is completed.
Most of us avail a home loan for purchasing under construction property wherein we receive possession at a later date, but home loan repayment starts immediately after availing a loan. Such borrowers can also claim tax deduction under Section 24b on interest paid during pre-construction period for up to 5 years (in 5 equal instalments).
Remember that the maximum amount that can be claimed remains capped at the overall limit of Rs 2 lakh per year, including both pre and post-construction period’s interest repayment.
3. Section 80EEA:
The Budget 2019 provided major impetus to the ‘Housing for All’ mission by announcing additional deduction of Rs 1.5 lakh on interest payment made on home loans availed between 1st April 2019 and 31st March 2020. In order to qualify for tax deduction under section 80EEA, the value of housing property has been capped at Rs 45 lakh. Remember that this benefit can only be availed by the first time home buyer.
4. Section 80C:
You can also claim tax benefits on stamp duty, registration charges and other expenses which are directly related to the transfer of the property, which were paid during purchase of house property. These charges can be claimed within the overall limit of Rs 1.5 lakh under section 80C. Remember that such a deduction can only be claimed in the year in which these expenses have incurred.
