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Buying a new house on loan? Be aware of these tax benefits

You could get tax deductions of up to Rs 5 lakh under various sections

September 10, 2021 / 08:54 AM IST

There are thousands of first-time home buyers  who seek clarity on tax benefits. The queries of home buyers are common and all are related to the tax benefits associated with a home loan.

A person taking a home loan does get income tax benefits under multiple sections: Section 80C, Section 24 and Section 80 EEA.

These sections are beneficial and provide a benefit of up to Rs 5 lakh, making it a very attractive.

Section 80C

The benefit from income tax under section 80C for the first-time homebuyer is up to Rs 1.5 lakh. This benefit of tax can be claimed under the home loan stamp duty as well as home loan principal categories. There are certain conditions to this claim of tax benefit such, as the person availing the home loan is bound to keep the property for at least five years from the date of possession.


Section 24

The tax exemption for the home buyer as per section 24 of the income tax act would be an exemption of up to Rs 2 lakh. This exemption would be under the home loan interest category. However, there is a condition on such exemption and that is a family member or even taxpayer himself must be residing in the property for which the loan is taken.

Section 80 EEA

Section 80EEA also offers income tax advantage for the first time home buyers of up to Rs 1.5 lakh. However, the condition over here is that the stamp duty value of the property, being residential, should be up to Rs 45 lakh only. And the tenure for the approval should be in the time frame of April 1, 2019 to March 31, 2022.

There are some most basic condition to be kept in mind:

-Borrowed loan must be financed from a financial institution

-No claim should be made under income tax section 80EE

-No residential property must be in the name of assessees till the loan is sanctioned

-The stamp duty value of property must be under Rs 45 lakh

For example, let’s say a person buys a house for Rs 50 lakh and taking Rs 40 lakh as loan, i.e., 80 percent loan, with 7 percent interest for 20 years tenure. The EMI for such a loan would be Rs 31,000 and the total amount paid in the first year would be around Rs 3,72,000.

The claim of Rs 95,000 can be taken under 80C, while the Rs 55,000 (from the Rs 95,000) can be taken for stamp duty payments, and is only valid for the first year. The annual earning is taken at Rs 15 lakh as of now and Rs 2,00,000 would be allowed under section 24.

Under the section 80EEA the individual can also claim Rs 77,000 interest amount.

Preparing for buying:

Start saving for your down payment: There is a requirement of having at least 10 to 25 percent of the amount as down payment while purchasing a property. If the property value comes to Rs 50 lakh, then one needs to have a corpus of around 20 lakh in hand.

Budget should followed: It is better to be economical for the time being.

Research for the property: Take multiple suggestions and tips before purchasing the house. Any other property with better rates and value proposition can also be considered.
Amit Gupta is Managing Director, SAG Infotech
first published: Sep 10, 2021 08:54 am

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