Assessing your annual home loan tax benefit is key to the homebuying process. This is because the repayment of your home loan is a major financial commitment, one that can last decades And you should use every measure possible to relieve the stress on your finances. The Government aids home loan buyers with tax deductions under various sections of the Income Tax Act. For instance, in recent years, the Government has incentivised purchases in the affordable housing segment by offering additional tax deductions, and the 2021 Budget sought to further that trend.

Here are some ways that you can extend the tax benefits on your home loan:

Extension of Section 80EEA’s interest deduction of up to Rs.1.5 lakh

In the 2019 Budget, the Government had proposed an additional deduction on interest repayment of up to Rs.1.5 lakh under Section 80EEA. This home loan tax benefit applies to home loans taken to purchase affordable housing. The tax benefit can be claimed over and above the interest deduction available under Section 24B. So, with Section 80EEA and 24B combined, your annual home loan tax benefit can go up to Rs.3.5 lakh.

To be eligible for tax benefits under Section 80EEA, the deadline to avail of a home loan was 31 March 2021. The latest Budget, however, has extended this deadline to 31 March 2022.

Conditions to claim additional interest deduction

The additional interest deduction offered by Section 80EEA is subject to certain conditions.

1. The home loan should be taken from a financial institution such as a bank or a housing finance company (HFC). You can consider an HFC such as Bajaj Housing Finance Limited
2. The stamp value of the residential property must not exceed Rs.45 lakh
3. The taxpayer must own no residential property as on the date of home loan sanction
4. The taxpayer must not be eligible for a deduction under Section 80EE
5. The home loan must be sanctioned between 1 April 2019 and 31 March 2022

In the case of Section 80EEA, there is no requirement of possession, that is, you can start claiming your home loan tax benefit as soon as interest repayment commences. However, there are some carpet area restrictions.

And that’s not all. You can claim the deduction under section 80EEA till the end of your home loan repayment.

If you do not meet all the eligibility conditions, for instance, if the property’s stamp value is Rs.50 lakh, you will not be able to claim the additional interest deduction. However, you can still claim benefits under Section 24B and 80C.

Home loan tax benefit under Section 24B and Section 80C

As a homebuyer seeking a first home, Section 80C offers you an annual tax deduction on principal repayment of up to Rs.1.5 lakh. Similarly, Section 24B offers an interest deduction of up to Rs.2 lakh per financial year. Both these deductions are subject to certain conditions.

For a self-occupied property, here is the total annual home loan tax benefit you can claim under sections 80C, 24B, and 80EEA.

Home loan tax benefit for a joint home loan

It is worth pointing out that the above-mentioned tax benefits on home loan repayment apply on a per-person basis and not a per-property basis. So, if you have taken a joint home loan, then each person can claim the deductions separately. That is, each person can claim a deduction of up to Rs.5 lakh under Sections 80C, 24B, and 80EEA combined. The tax benefits that you can claim would depend on the ownership share in the property; however, the main point is that the Government makes it possible for you to claim a large annual home loan tax benefit and with Budget 2021, this total benefit is extended.

This extension to avail the extra tax deduction of up to Rs.1.5 lakh is sure to help the affordable housing market gain some traction. Off late, there has been some inertia on the demand side even though the Government was promoting affordable housing through PMAY and lenders were extending some of the lowest home loan interest rate offers.

If you are interested in purchasing a home in the affordable housing segment, do account for Budget 2021’s tax incentive. Moreover, opt for an offering like the Bajaj Housing Finance Limited Home Loan to get a high loan amount at an attractive home loan interest rate. Here, you can get high-value loans on affordable terms for a tenor of up to 30 years. Moreover, you can qualify for an interest subsidy of up to Rs.2.67 lakh under PMAY with this home loan subject to terms and conditions. Make the most of the annual home loan tax benefit the IT Act offers you and apply online for a home loan to fulfil your dreams without hassles.