The tax deductions you can claim if you have a home loan in 2023-24
- Apart from the deduction of up to ₹1.5 lakh on principal payments, and up to ₹2 lakh on interest payments, an additional deduction of ₹50,000 is available when buying affordable homes.
- If you have a
home loan, it makes sense to opt for the old tax regime.
- If a couple jointly takes a home loan, they can maximise the tax benefits.
AdvertisementSince Budget 2023-24 tweaked the tax slabs to make the new tax regime more appealing, and made it the default tax regime, the question on everybody’s minds is – which tax regime should they opt for. While the new tax regime has rationalised the tax structure, the majority of the deductions allowed by the old tax regime are not available under the new tax regime.
However, if you have a home loan, the choice may become simpler. In that case, you may want to opt for the old tax regime. Simply put, it means that if you have a home loan, the old tax regime helps you save more taxes. “If you can claim a total deduction of over ₹4.25 lakh, including your home loan, you may wish to continue with the old tax regime as your savings on tax may be much higher,” says Adhil Shetty, chief executive officer, BankBazaar, an online financial marketplace.
Let us take a deeper look at the various tax deductions that are available if you have a home loan.
“A home loan can help avail an
However, the 80C deduction of up to ₹1.5 lakh is available for a variety of other investments and payments as well – like public provident fund (PPF), equity-linked savings scheme (ELSS) funds, payment of life insurance premiums and so on.
Also, the additional deduction of ₹50,000 on interest payments under section 80EE is available only under certain conditions. This condition is only valid if the loan amount borrowed is not more than ₹35 lakh, the property's value is under ₹50 lakh, and the loan was approved within the period of April 1, 2016 to March 31, 2017. Hence, if you do not meet either of the above conditions, the additional deduction of ₹50,000 will not be available to you.
A joint home loan can maximise tax benefits.
If a couple takes a joint home loan, they can maximise the tax benefits.
“For a joint home loan, both borrowers can claim deductions on the home loan interest and principal payments. They can each claim deductions up to ₹2 lakh on the interest (Sec 24), and up to ₹1.5 lakh on the principal (Sec 80C) component of a home loan,” says Shetty.
If a married couple has jointly taken a home loan, in which both are the co-borrowers and co-owners of the property they are looking to purchase, and both partners are servicing the loan, then both of them will be eligible to apply for both the aforementioned deductions i.e. ₹2 lakh and ₹1.5 lakh individually. Thus, the total deduction they can avail will be doubled. Another requirement is that the property in question must be completely constructed.
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