Home Loan Tax Benefit – Calculate Income Tax Benefit on Home Loan for 2023

Buying your own house is on everyone’s list. And as exciting as it is to find one of your dreams, working out how you’re going to finance it is a whole other ballgame. Dipping into your savings or selling off assets can be one way. But you have a better option.

Applying for a home loan can be far more beneficial. Not just because it helps you keep your funds safe and see them grow or allows you to hold on to your assets and let them appreciate, but because you enjoy tax benefits.

Under the Income Tax Act 1961, you can get income tax benefits on home loans. And if you want to know what these are and how you can calculate this with a home loan tax benefit calculator, keep reading.

Income tax benefits on home loan

The government of India has encouraged citizens to invest in real estate. And this is reflected in the provisions of the Income Tax Act 1961. By providing income tax benefits on home loans, the government hopes to incentivise the public to invest in these assets and grow the Indian housing sector as well. Let’s look at some of these provisions.

• Under Section 24 of the Income Tax Act 1961, you can claim tax deductions of up to Rs. 2 Lakh on interest payments for a home loan.

• Under Section 80C of the Income Tax Act 1961, you can get tax deductions of up to Rs 1.5 Lakh annually on the principal component.

• If you are a first-time home buyer, you can claim income tax benefit on a home loan of up to Rs 50,000 under Section 80EE of the Income Tax Act 1961

To claim deductions under these sections, you would have to furnish necessary documents clearly indicating the interest and the principal amounts. After the deductions are made, the balance income will be taxed according to the specific tax slab rates.

Conditions on home loan tax benefits

Home loan applicants can enjoy significant savings under the provisions of the Income Tax Act 1961, as mentioned above. However, there still exist certain terms and conditions that must be met to avail of these. And that’s what we will be discussing here. Let’s begin!

#1 Section 24 of the Income Tax Act 1961

As we discussed earlier, under this section, you can claim deductions of up to Rs 2 Lakh based on the home loan interest payments. But to avail of these, the property concerned must complete its construction within five years.

#2 Section 80C of the Income Tax Act 1961

Under this section, you can claim a maximum deduction of Rs 1.5 Lakh on the principal repayment amount. But apart from that sum, associated costs of purchasing the concerned property, like stamp duty and registration charges, are also considered while calculating tax deductions.

#3 Section 80EE of the Income Tax Act 1961

As a first-time home buyer, you can claim deductions under this section. Other essential conditions include.

• The home loan principal amount should not exceed Rs 35 Lakh
• The value of the property should not exceed Rs 50 Lakh

What is a home loan tax calculator

Instead of indulging in complex and lengthy calculations to ascertain your home loan deductions, use a home loan tax benefit calculator. You can access it online and know your tax deductions right from the comfort of your home.

It helps you determine your tax benefits with and without accounting for the home loan deductions so that you can make an informed decision. 

 Most home loan tax benefit calculators need the following details.

• Loan amount
• Loan tenure
• The interest rate for the loan
• The annual income of the applicant
• Any existing deductions under sections of the Income Tax Act 1961
• Start date of the loan

 Once you have fed these details into the online home loan tax calculator, it will be able to calculate your tax deductions within seconds.  

Final thoughts

A home loan doesn’t only help you buy your dream house but also helps in reducing your income tax payments. And with a home loan tax benefit calculator, you can calculate your tax benefits and make the most out of your finances.

Now that you know the benefits of getting a home loan, your next step is to find a reliable financial institution to help you through the journey. We at Tata Capital can be of service. With competitive interest rates and fast approvals, we offer home loans that help you buy the dream home you’ve always wanted.

To learn more, visit our website and apply for a loan today!