First-time homebuyers in India often face high property costs. A Home Loan spreads payments over time. Home Loan tax benefits reduce the effective cost by lowering income tax each year. These benefits apply to salaried professionals, entrepreneurs and self-employed individuals running small businesses. Principal repayments qualify for deduction under Section 80C up to ₹1.5 Lakh annually. Interest deductions under Section 24(b) are limited to ₹2 Lakh for self-occupied properties. Extra relief is available through Sections 80EE and 80EEA for first-time and affordable housing buyers. Recent Budget 2025 updates enhance the let-out property limits. These provisions make homeownership more accessible while building long-term financial stability.
Overview of Key Tax Benefits
When you repay a Home Loan, you are not just paying off debt – you are potentially reducing your taxable income. The government provides deductions on both the principal amount and the interest paid on your Home Loan under different sections of the Income Tax Act.
Section 80C: Deduction on Principal Repayment
Under Section 80C of the Income Tax Act, buyers can claim up to ₹1.5 Lakh each financial year on the principal portion of their Home Loan EMIs. This limit is part of the overall Section 80C allowance, which also includes investments like the Public Provident Fund and insurance premiums.
The deduction applies to both self-occupied and rental properties. Buyers can retain the benefit if they hold the property for 5 years after taking possession. Buyers can also claim stamp duty and registration fees under Section 80C, up to ₹1.5 Lakh in the payment year.
Section 24(b): Deduction on Interest Repayment
Interest on a Home Loan is deductible under Section 24(b). For self-occupied properties, the limit stands at ₹2 Lakh per financial year. This includes interest on loans for purchase or construction.
Pre-construction interest spreads over five years from possession, with one-fifth added annually within the ₹2 Lakh cap. Let-out properties are subject to no upper limit on interest deductions. Joint owners claim in proportion to their share; a couple splits the ₹2 Lakh equally. Self-employed buyers from small businesses benefit similarly.
Section 80EEA: Additional Interest Deduction for Affordable Housing
Section 80EEA allows up to ₹1.5 Lakh interest deduction over Section 24(b) for affordable homes up to ₹45 Lakh. Loans sanctioned by March 2026 qualify for first-time buyers with no other property. This aids buyers running ventures like juice bars or stationery shops.
Section 80EE: Interest Deduction for First-Time Buyers
Section 80EE provides up to ₹50,000 extra interest deduction beyond Section 24(b) for first-time buyers. The loan must not exceed ₹35 Lakh and the property value must be below ₹50 Lakh. No prior home ownership applies at the sanction date. This targets young professionals and small business owners, such as event planners or fitness trainers, under the old tax regime.
Recent Updates from Budget 2025
Budget 2025 raises the Section 24(b) limit to ₹3 Lakh for let-out properties, while self-occupied retains ₹2 Lakh. Sections 80EE and 80EEA extend for first-time buyers. These aid middle-income groups and small business owners, like caterers or repair garages. Select the old regime for full deductions.
Eligibility Criteria
Not every borrower qualifies for all deductions.
- Section 80C: Individuals or HUFs; construction complete; no sale within five years of possession. Source: Income Tax Department.
- Section 24(b): Loan for purchase/construction completed within five years; interest certificate required. Source: Income Tax Department.
- Section 80EEA: Loan sanctioned by March 2026; property ≤₹45 Lakh; no prior ownership; no Section 80EE claim. Source: Income Tax Department.
Claiming the Deductions
Maximising your tax savings is not just about knowing the rules; it is about proper documentation and timely filing. Here is how to ensure you get the benefits you are entitled to.
Step-by-Step Guide to Claiming Benefits
- Calculate Your Components: At the start of the financial year, your RE or lending partner will provide a provisional certificate breaking down your EMIs into principal and interest. Use this to estimate your total deductions.
- Inform Your Employer: If you are salaried, submit this provisional certificate to your HR or finance department. They will adjust your TDS (Tax Deducted at Source) accordingly, meaning you get a higher take-home salary immediately rather than waiting for a refund.
- Collect Final Documents: At the end of the financial year, download the final interest certificate from your RE or bank. This serves as proof of the actual amount paid.
- File Your ITR: When filing your Income Tax Return (ITR), enter the principal repayment amount under Section 80C. Enter the interest amount under the head “Income from House Property” for Section 24(b). If eligible for Section 80EEA, claim the additional interest under “Chapter VI-A deductions”.
Essential Documents Checklist
- Home Loan Interest Certificate: The most critical document, issued by your bank/Regulated Entity (RE).
- Completion Certificate: Proof that construction is complete (mandatory for claiming principal deduction).
- Bank Statements: Reflecting the EMI payments made during the year.
- Stamp Duty Receipts: If you are claiming registration charges under Section 80C.
Tips and Considerations
Home Loan benefits can be appealing, but there are important pitfalls to avoid. Here are some tips to help you stay informed about Home Loan tax planning.
- Do not sell your property too soon. There is a five-year lock-in period for Section 80C benefits. If you sell your property within five years of moving in, you will lose your tax benefits and have to pay taxes on any deductions you claimed in previous years.
- You must be an owner of the property to claim tax benefits. Simply paying the EMI is not enough. If you pay the EMI for a house that belongs to someone else, like your parents or your spouse, but is not on the title deed, you will not receive any benefits.
- Co-borrowing is beneficial. Taking a joint loan with a working spouse or parent can double your tax benefits. Ensure the EMI payments are made from a joint account or shared to support your claim.
- If you bought an under-construction property, you cannot claim deductions until you receive possession. However, the interest you paid during construction is not lost. You can claim it in five equal annual instalments starting from when you get possession, in addition to the regular interest limit of ₹2 Lakh under Section 24(b).
Conclusion
Home Loan tax benefits lower ownership costs for first-time buyers. Principal under Section 80C, interest via 24(b) up to ₹2 Lakh (₹3 Lakh let-out post-Budget 2025), plus 80EE/80EEA extras yield major savings. Salaried workers, entrepreneurs and self-employed from small businesses gain equally. Reputed lenders like Godrej Capital provide Home Loan products with quick processes and flexible EMIs. Consult a tax advisor and maintain records. Homeownership fosters growth and security.
