What are the tax benefits of home loans?

The tax benefits of home loans

Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. From assessment year 2005-07) under section 80C of the Income Tax Act 1961.

Interest paid on the home loan: As per Sec 24(b) of the Act, a deduction up to Rs. 150,000 towards the total interest paid on the home loan towards purchase / construction of house property can be claimed while computing the income from house property (The deduction stands reduced to Rs.30,000 in case of loans taken prior to March 1, 1999) for the self-occupied property & if the property is rented out than there is no such limit & the actual interest paid on the home loan of the property is eligible for deduction. The interest payable for the pre-acquisition or pre-contruction period would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.

In case of self occupied property, this deduction is allowed only for one such self - occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is also eligible for deduction under section 24(b). But the interest paid on purchase of plot is not eligible. Deduction is allowed is only for purchase/construction of House Property.

Principal repayment of the home loan: As per Section 80C along with section 80CCE of the Income Tax Act, the principal repayment up to Rs. 100,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of some prescribed conditions.

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