Availing a home loan not only helps them in making their dreams come true but also save their taxes in many ways. Individuals are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961 (“the act”).

Deduction on principal amount u/s 80C- You can get tax relief for the amount paid for the purpose of purchase or construction of residential house property, the income of which is chargeable to tax. Payment made towards principal repayment of borrowed amount from recognised bank or financial institution and payment of stamp duty, registration fees, and other expenses for the purpose of transfer of such house property to the assessee shall be allowed as deduction u/s 80C of the act. However, any payment made towards the cost of any alteration, addition or renovation or repair of property after issue of completion certificate or after occupying the property or part thereof shall not be eligible for such deduction.

Deduction on Interest paid- When borrowed money is utilized for acquisition, construction, repairing or renewal of the house property then the amount of any interest payable on such capital shall be allowed as deduction u/s 24(b) of the act. Where the property is self occupied the deduction for interest shall be as follows-
• Where the property is acquired or constructed with capital borrowed on or after 1-4-99 and such acquisition or construction is completed before 3 years from the end of the financial year in which such loan is taken, the amount of deduction is limited to Rs. 1,50,000.
• In case where the amount was borrowed prior to 1-4-99, the amount of deduction is limited to Rs. 30,000.
• Where the loan is taken for renewal or renovation purpose, the deduction shall be limited to Rs. 30,000.
Addition to above, interest payable by the assessee in respect of pre-construction or pre-acquisition period, prior to the previous year in which such property has been acquired or constructed is deductible in 5 equal instalments commencing from the previous year in which house is acquired or constructed.
If loan is taken jointly in the name of two members of the family, then both can enjoy the deduction u/s 24(b) individually proportionate to the value of money borrowed by them.

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