Buying a home requires a huge expense and a home loan can ease your journey to owning a home. Not only it helps you purchase a home, but it can also offer you tax benefits under the Income Tax Act, subject to applicable rules and conditions.

So when you are buying a house or already have a home loan, it’s good to know about home loan tax benefits.

What are home loan tax benefits?

While repaying a home loan, your monthly EMI (Equated Monthly Installment) will have two components:

1. The principal amount: Amount that goes towards repayment of the loan amount

2. The interest amount: Amount paid to the lender for availing the loan

Under certain conditions and applicable regimes, you may be able to claim a tax benefit on eligible home loan repayments.

Tax benefits on home loan principal

The principal amount is eligible for deductions under section 80C, subject to applicable conditions and limits.

Section 80C lists down various eligible investments/payments and this deduction is claimed under that head. Since it’s a sum of eligible items, there is an overall deduction limit (e.g. if you claim any deductions from other eligible items under section 80C, it’ll reduce the amount available for deduction under your home loan

Tax benefits on home loan interest

The interest amount is eligible for a deduction under section 24(b), subject to applicable conditions and limits.

Moreover, in case of self-occupied properties, you might be able to claim additional deductions (subject to applicable conditions) under section 80EEA.

These tax benefits can help you save significantly on your income tax and hence it’s good to understand how you can claim them. But remember, these deductions would be allowed to the extent of your applicable income tax slab rates, your ITR (income tax return) filing status and any changes to the rules/regime by the government.