There are 3 sections of Income Tax Act, 1961 which provides deduction in respect of Home Loan repayment which have been summarized in below table.
UNDER SECTION 24
a. Property is Self-Occupied & Construction/Acquisition is completed within 5 Years from the date of Borrowing then Maximum Deduction that can be claimed is ₹2 Lakhs.
b. Property is Self-Occupied & Construction/Acquisition is not completed within 5 Years from the date of Borrowing then Maximum Deduction that can be claimed is ₹30,000.
c. Property is not Self-Occupied then there is no limit on amount of deduction under this section & also no completion condition is attached.
Deduction under this section can be claimed only in respect of Interest portion repaid.
UNDER SECTION 80C
Individuals & HUFs
a. A maximum deduction of ₹1.50 Lakhs can be claimed under this section in respect of Principal portion repaid.
a. This deduction can be claimed only after construction of House Property is completed.
b. The benefit claimed under this section shall be reversed if such house property is sold within 5 Years of acquisition.
c. This section also allows you to claim the amount that you pay on stamp duty and registration as a deduction, regardless of whether you take a home loan or not.
UNDER SECTION 80EE
This Section allows the first time buyer to claim an additional deduction of ₹ 50,000 in respect of Interest portion repaid.
This deduction is available only if value of your home is less than Rs.50 lakh, and the value of the home loan is below Rs.35 lakh.
Tips for Tax Planning:
You may apply for a Joint Home Loan along with your spouse, friend or even relative. In such a case, you are eligible for tax benefits as long as you co-own the property as well. You can each make claims up to the full amount under Section 80C and Section 24. So, if tax-saving is on the agenda, this move will help you boost your savings significantly.