How to Declare a Home Loan in Income Tax?

The tax advantage is one of the most significant benefits of a home loan. Your house loan is more affordable because of the tax savings. 

Individuals who apply for a home loan are eligible for home loan tax benefits under multiple provisions, including Section 80 EEA and Section 24(b) of the Income Tax Act of 1961, which provides income tax benefits of up to Rs.1.5 Lakh. 

In this post, we'll look at the numerous tax advantages of house loans.

Income Tax Benefit on Home Loan

A home loan is eligible for deductions under various sections of the Income Tax Act. A home loan is made up of two components: principle and interest. 

According to the income tax legislation, you can claim deductions for the repayment of both of these components. Let's take a closer look at these.

1. Tax Benefits on Home Loans Under Section 80C

Section 80C of the IT Act allows you to claim tax deductions on the principal amount you repay to your lender. This break also applies to the registration and stamp duty expenses on your home.

The maximum home loan tax exemption under Section 80C is Rs.1.5 Lakh per fiscal year. Other investment options under section 80C include ELSS funds, PPFs, and tax-saving FDs. Even if you have invested in such instruments, the deduction limit remains at Rs.1.5 Lakh.

2. ​​​Home Loan Tax Benefits under Section 24(b)

Section 24(b) allows you to deduct the interest component of your home loan. You can claim up to Rs.2 Lakh in a single fiscal year. On the other hand, the full interest component on the principal value is deductible if the property is rented out. ​​

If you used a top-up loan for renovations or repairs, the maximum deduction is Rs.30,000.​​

3. Home Loan Tax Benefits under 80EE

This tax advantage on home loans is exclusively available to first-time homeowners. If you are purchasing a home for the first time, you can claim additional deductions of up to Rs.50,000 under section 80EE if you meet certain conditions.

To be eligible for this benefit, the house loan amount must be no more than Rs.35 Lakh, and the property cost cannot exceed Rs.50 Lakh.

4. ​​​Home Loan Tax Benefits under Section 80EEA

To qualify for deductions under Section 80EEA, you must be a first-time homeowner with a home loan of less than Rs.25 Lakh. The property value must not exceed Rs.45 Lakh, and you must have obtained a home loan between April 1, 2019 and March 31, 2022. 

Also, keep in mind that only individual homebuyers are eligible for this financial incentive. Additionally, the increased loan interest deduction will only apply to residential properties.

Impact of New Tax Regime on Home Loan Benefits

Home Loan benefits under the old tax regime stay the same as one can enjoy deductions without any restrictions. However, the benefits under the new tax regime are reduced. Let's know in detail about the same:

• The deduction under Section 80C for the payment towards the main component of the home loan, stamp duty, registration charges, Section 80EE, and Section 80EEA are not available.

• Self-occupied property does not qualify for a deduction under section 24(b) for interest payments on a home loan.

• However, a deduction under section 24(b) is possible for let-out properties. If net revenue from rented property results in a loss, the loss can be offset against profit from another property but not against other types of income such as salary or other sources.

Tax Deduction for Joint Home Loan

If the loan is obtained jointly, each loan holder can deduct up to Rs.2 Lakh in house loan interest and Rs.1.5 Lakh in principal payments under Section 80C on their tax returns.

To claim this deduction, they must also be co-owners of the property under loan. So, taking out a loan jointly with a family member may allow you to claim a higher tax benefit.

ITR Filing for Home Loan

Filing your ITR to claim home loan deductions is a simple process. You must keep all necessary documents on hand to make the ITR filing procedure go effortlessly. The following documents are required to file an ITR:

• Property ownership documentation

• Certificates of purchase or construction and a home loan certificate with interest and principal details

• Municipal tax receipt

• The taxpayer's financial and personal documents

How to File an ITR for a Home Loan?

The steps for filing an ITR are as follows:

STEP 1: Submit documents to your employer and request TDS changes. This compliance is optional for freelancers and self-employed Home Loan borrowers.

STEP 2: Next, understand the deductions available for both self-occupied and rented residences. Before filing your maximum deduction claim, consult a certified public accountant (CPA) or financial counselor.

STEP 3: Once you have completed all the required steps, go to the Income Tax Department's official website. 

STEP 4: Follow the steps provided to complete your Home Loan tax submission.

STEP 5: Download your tax statement for verification.

A correctly filed ITR is a requirement for loans such as a home loan.

When it comes to submitting the Income Tax Return (ITR) for Home Loan Tax Exemptions, it is critical to understand the various deductions available to you as a borrower. Sections 24(b) and 80C allow you to deduct interest payments and principal repayments from your home loan taxes. There are various exemptions covered under Section 80EE.

It is critical to understand all of the home loan tax benefits because they can help you save a large amount on your tax payments.