Tax benefit on Home Loan

Systematic Transfer Plan (STP)

Principal repayment of home loan

1) The principal repayment component in the home loan EMI is allowed as deduction under Section 80C of the Income Tax Act.

2) The maximum tax deduction allowed under Section 80C is 1.5 lakh, which includes investments in other instruments also.

3) This deduction is allowed only after the construction is complete and completion certificate is awarded to the buyer.

4) Payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C in year in which paid.

5) In case the assesse transfers property on which he has claimed tax deduction under Sec 80C before 5 years, deduction claimed shall be deemed as income in year that the property was sold and taxed accordingly.

Tax benefit on home loan interest

1) The interest component in the EMI can be claimed as deduction from “income from house and property“ under Section 24 of the Income Tax Act.

2) The maximum tax deduction allowed under Section 24 is 2 lakh for self-occupied property and if the property is not self-occupied, there is no maximum limit.

3) The interest payments for the year shall result in a loss under the head “income from house property“ which can be adjusted in the same year against other heads of income including salary.

4) If the property is not completed within three years from when the loan was taken, then the interest benefit drops to 30,000.

5) The pre-construction interest can be claimed from the year when the construction is complete in five equal instalments.

Using Loan EMI Calculator, calculate total interest paid & total principal amount paid at the end of every financial year.
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