Under Section 24 of the Income Tax Act, a taxable individual can claim deduction on payment of interest for a home loan. The property must be self-occupied and maximum deduction allowed is Rs. 2 lakhs.

Pre-Construction Interest

You can also claim a deduction for interest paid on housing loan taken before completion of construction of the property. It is known as pre-construction interest. It is allowed to be deducted in 5 equal instalments starting from the financial year in which construction is completed. Rs. 2 lakhs limit is applicable for pre-construction interest as well, in case of self-occupied property.

Income Tax Benefit Under Section 80EE

Under Section 80EE, there is a provision for an additional deduction of Rs. 50,000 for first-time homeowners for interest on their housing loans. The value of the property should be less than or equal to Rs. 50 lakhs and the amount of the home loan should be Rs. 35 lakhs or less. Loans sanctioned between 1st April 2016, and after 31st March 2017, cannot claim deduction under this section. This deduction shall be allowed in addition to the deduction allowed under Section 24(b).

Additional Read – Understanding Income Tax Deduction Under Section 80EE

Deductions Under Section 80EEA

By inserting section 80EEA, the government has extended the limit of deduction up to Rs. 1.5 lakhs. This section applies to any individual paying interest on the a against residential property provided that the stamp value of the property is less than Rs. 45 Lakhs. Loans sanctioned before 1st April 2019 and after 31st March 2020 are not eligible for deduction under this section. Note that at the date of sanction, the individual should not own any other residential property. Lastly, the individual should not be eligible for claiming any deduction under Section 80EE.

For salaried individuals repaying a home loan for a self-occupied property, the relevant form is ITR-1 Sahaj. Before filing ITR, individuals must ascertain the following:

  • The home loan comes under which section?
  • Home loan interest comes under which section?

Additional read – All You Need to Know About Section 80EEA, 24 and 80C

Once you are sure, follow the steps given below for housing loan ITR.

Step 1 – Fill in all your details (name, address, Aadhar number, etc.)

Step 2 – Under the head Salaries, enter your chargeable income. Be sure to check Form 16 before entering this figure.

Step 3 – Check the box corresponding to self-occupied property. Enter the interest payable on borrowed capital. For self-occupied homes, the annual value is nil.

Step 4 – Enter income from other sources, including interest income from fixed deposits and other investments. Now compute B1+B2+B3 = B4. B4 is the Gross Total Income.

Step 5 –  Enter the applicable deductions under Sections 80C, 80D and others and add them up (C1). Compute B4 – C1 to obtain C2 or Total Taxable Income. C2 will be used to determine which tax bracket you fall in, and tax will be charged accordingly.

Step 6 – Furnish your bank account details.

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