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Home Loan Tax Benefits Explaining Section 80EEA, 24 and 80C

Home Loan Tax Benefits Explaining Section 80EEA, 24 and 80C

Taking a home loan surely assists you in buying your dream house, but that is not the only assistance it provides. Housing finance also helps you save up on tax payments under the ITA sections of 80EEA, 24 and 80C. This article talks about the tax benefits under these three aforementioned sections.

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Deductions Under Section 80 EEA

This new section has been introduced in the union budget of 2019 and applies only to first-time home buyers. People who buy their first home under the affordable housing scheme by the Government of India can avail tax benefits under Section 80EEA. 

Section features:-

a) Tax savings

Interest payments of up to Rs. 1,50,000 are eligible for deduction. This deduction can be combined with the stipulated deduction provided on interest payments of up to Rs. 2,00,000 under section 24 of the ITA. Therefore, an individual can avail tax benefits on the total amount of Rs. 3.5 lakhs for interest on their housing loan. The combined benefit can be further understood through a simple sample calculation. 

  • Total income before tax 8,00,000

                                       (-) 2,50,000 (tax exemption) 

  • Total taxable income = 5,50,000
  • Housing loan interest = 3,50,000

payments applicable 

for deduction under 

sections 80EEA and 24 

  • Revised taxable income = 2,00,000
  • Total tax payable = 0

b) Eligibility criteria

This deduction is only applicable to individual taxpayers. If you own a company, a partnership firm, HUF, and AOP, you are not eligible to avail this tax benefit. Additionally, to avail this deduction, an individual must not own another property on the date of sanction of the loan.

Additional Read:- Check Out the Benefits of Taking a Home Loan in Your 20s

Deductions Under Section 24:-

a) Tax savings

Under this section, interest payments of up to Rs. 2,00,000 are tax-free. This deduction applies regardless of whether the property is occupied by the owner, given out on rent or left vacant. If you are applying for a home loan, it is advisable to first exhaust your tax deduction limit under Section 24 and then move on to exhausting the limit under Section 80EEA, if eligible, to complete the benefit spectrum. Let us understand Section 24 better by taking an example.

Shruti works in Ahmedabad at a pharmaceutical company. She recently purchased a house in the same city and lives in it with her parents. Her mother is a joint owner of this property. Shruti took a home loan of Rs. 25,00,000 with a monthly EMI of Rs. 25,000 that began in August 2019. Her mother is not a co-borrower on this loan. Is Shruti making full use of the tax benefit she is eligible for, under Section 24 in FY 2019-20?

  • Total number of EMIs for FY 2019-20 = 25,000 x 8 months = 2,00,000
  • Amount towards principal repayment = 10,000
  • Amount towards interest repayment = 1,90,000
  • Amount Shruti is eligible to deduct from her IT returns = 1,90,000 

 If Shruti wants to fully utilize her tax benefit, she should increase her interest payment by another 10,000 rupees. Presently, she is losing tax benefit on Rs. 10,000.

b) Eligibility Criteria

This tax benefit is available to all citizens who are sanctioned a housing loan. However, this deduction gets reduced from Rs. 2,00,000 to Rs. 30,000 if the property stays under construction for more than 5 years.

Deduction Under Section 80C:-

a) Tax savings

This section allows a maximum deduction of Rs. 1,50,000 from your total taxable income. This deduction can be availed on principal repayment. Let us look at a few popular investment instruments eligible for deductions under this section.

  • Home loan principal repayment
  • PPF or Public Provident Fund
  • Life Insurance
  • Senior Citizens Savings Scheme
  • NSC or National Savings Certificate
  • Equity Linked Savings Scheme
  • Sukanya Samriddhi Yojana

b) Eligibility Criteria

Tax benefits under this section are available to all Indian citizens. The aforementioned sections are predominantly created for housing loan-related tax benefits, whereas, Section 80C has a more generalised tax-saving outlook. 

Additional Read:- Common Myths About Home Loan

Final Thoughts  The subsidies on housing finance are encouraging. Apply for housing finance and enjoy home loan tax benefits with Tata Capital. Log on to our website and check your home loan eligibility by using our reliable home loan calculator and home loan EMI calculator. Use our EMI calculator for home loan and find out more about our competitive home loan interest rates. 

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