Repayment of housing loan is through Equated Monthly Installments (EMI), which consists of principal and interest component. As the repayment comprises of 2 different components, the tax benefit on home loan is governed by different sections of the Income Tax Act and these are claimed as tax deductions under different sections while filing the Income Tax Return.

The sections under which tax benefit on home loan can be claimed are explained below:

1. Section 80C:

Tax benefit on the principal amount on home loan of the maximum tax deduction allowed under Section 80C is Rs.1, 50, 000. This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made. The amount paid as stamp duty & registration fee is also allowed as tax deduction under Section 80C even if the assesse has not taken loan.

2.  Section 24:

1. Income tax benefit on interest on home loan of the maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 lakhs. Moreover, if the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 lakhs to Rs 30,000 only.

2. In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.

3.  Amendment in Budget 2017

1. The interest paid is reduced from the rent paid to arrive at the income from house property. In some cases, it may happen that the Interest paid is more than the rent earned which will result in loss from house property. The Finance Act 2017 announced on 1st Feb 2017 has put a restriction to the maximum amount of loss under head house property that can be set off from other heads of Income.

2. Tax benefits get divided among co-applicants in case of a joint loan. The division takes place in the same proportion in which the asset is owned by each co- applicant. Each co-applicant can claim a maximum tax rebate of up to Rs.1.5 lakhs for principal repayment (Section 80C) and Rs. 2 lakhs for interest payment (Section 24). The very first condition is the house property has to be bought by the individuals jointly, and this should be in their joint names.