Home loan doesn’t just provide you the fund needed for buying your house, it also provide income tax benefits for a longer duration. The most attractive benefit associated with it is it makes assessee eligible for deduction u/s 80C and 24(b) of the Income Tax Act, 1961. Once your loan application is sanctioned and disbursed, you receive entire loan amount and then the Bank calculates your EMI (Equated Monthly Instalment) based on the interest rates, total loan amount and the tenure of the repayment for the entire loan. EMI is simply the amount of money that is paid back to the lender (Bank) on a monthly basis and it is essentially made up of two parts, the principal amount and the interest for the home loan. Income tax treatment and deduction available for both the portions i.e., principal portion and interest portion of EMI is different and the same has been described below. Principal portion The principal portion of the EMI paid towards repayment of the loan can be claimed as deduction u/s 80C of the Income Tax Act, 1961 upto Rs. 1 lakh each year irrespective of your tax bracket. But for getting the benefit of this deduction the only condition is that the home loan to be towards a property for self occupation. The only exception is if the house is not in the city in which you are working that means if your’s city of employment is different from the city where you have purchased a home then you are eligible for this deduction. Moreover, for claiming this benefit there is no restriction on the number of houses but the only condition with this is that if any one of the house for which you are paying EMI is in your city of employment it should be self occupied as you have to satisfy the “self-occupied” rule too (with the allowed exception). Interest portion The interest portion of the EMI paid is treated as an ‘expense’ under the head ‘Income from house property’ and deductible under Section 24(b) from the total income of the assessee up to a maximum of Rs. 1.5 Lakhs per annum. The interest amount would appear as a negative amount under the head “Income from House Property”, and would thus be deductible from your total income under Sec 24. Even if you have any other income from the house (like rent), that income would get reduced by the amount of interest paid (subject to the cap of Rs. 1.5 Lakhs). Moreover, there is no restriction of “self occupied property” and number of houses for claiming this benefit. Tax Returns for Financial Year 2010 -11 (March 2011) has started. Request you to please visit Taxmantra.com or mail us Form16/ Salary Certificate and details of other income, at info@taxmantra.com . We would take it from there to file your return of income. Taxmantra.com provides complete online taxation solutions for individuals ( Tax Returns + Tax Support + Tax Planning ) – please see this – Services Offered. Taxmantra.com- Providing Complete Online Tax Solutions for Individuals, Not Just Returns .