• Notification Date: 07-10-2024
• Notification No: N/A

Tax Enquiry: Can I claim income tax deduction under Section 80C and Section 24(b) on the loan given by my parents to buy a house?

Under Section 24(b) of the Income Tax Act, you are eligible to claim deduct interest paid on money borrowed for the purchase, construction, renovation, or repair of a house.  

Home Loan Tax Deduction: How can you save on income tax on a home loan?   

If you have taken a loan to buy a house, you can claim deduction under the provisions of the Income Tax Act, 1961, on the interest portion, which you repay as part of the installment. Taking a home equity loan can be costly, but you can also benefit from several tax deductions that can help you save on taxes every year. It is important to understand how to make the most of these benefits. 

Effect of the new tax regime on home loan profits   

The home loan benefit remains unchanged as it is an unrestricted deduction under the old tax regime, but the amount of the benefit is reduced under the new tax regime. Please let us know the details.
• Deduction under section 80C for payments of the principal part of the home loan, stamp duty, and registration fees, and deduction under sections 80EE and 80EEA, are not available.
• Deduction under Section 24(b) for payments of the interest part of the mortgage is not available. Mortgages are not available for owner-occupied homes.
• However, Section 24b deduction is available for rental property. If a loss is incurred due to net income from rental property, the loss may be offset against profits from another property but not against other types of income such as salary or other sources.   

Home loan interest deduction under Section 24   

To claim the tax deduction, you must take out a loan to purchase or build real estate. If you have taken a loan for construction of a house, you have to complete the construction within five years from the end of the financial year in which you have taken the loan. The interest portion of the home loan EMI for that year can be claimed as a deduction from total income under Section 24 up to a limit of Rs 2 lakh. With effect from assessment year 2018-19, the deduction limit for interest paid on a self-occupied house is Rs 2 lakh. For rented property, there is no limit on claiming tax deduction on interest. Which means you can claim to deduct the entire interest paid on the home loan. If the construction time exceeds the specified time, i.e., 5 years, you can only deduct the home loan interest up to a limit of Rs 30,000 in that financial year.   

Deduction for repayment of capital under Section 80C   

The principal amount of the home loan paid during the year is allowed as a deduction under Section 80C. The supreme amount that can be appealed under this section is Rs 1.5 lakh. However, to claim this deduction, the property cannot be sold within five years of taking possession of it. Otherwise, the deduction claimed earlier will be added to the income in the year of sale.   

Deduction for registration fees and stamp duty under Section 80C   

In addition to deduction for repayment of capital, deduction for stamp duty and registration fees can also be claimed under Section 80C, but the limit is a total of Rs 1.5 lakh. However, these expenses can be claimed only in the year in which they are incurred.   

Additional deduction under Section 80EE   

Additional deduction under Section 80EE is provided to home buyers up to Rs 50,000. To claim this deduction, the following conditions must be seen:
• The loan amount should not be more than Rs 35 lakh, and the value of the property should not exceed Rs 50 lakh.
• The loan should have been sanctioned between 1 April 2016 and 31 March 2017.
• And, on the date of sanction of the loan, the person does not own any other house. He/she is a first-time home owner.   

Additional deduction under Section 80EEA   

To boost the housing sector, an additional deduction under Section 80EEA up to Rs 1.5 lakh was introduced in Budget 2019 for home buyers. To claim this deduction, the following conditions must be seen: • The stamp rate of the property does not go beyond Rs 45 lakh.
• The loan should be disbursed between 1 April 2019 and 31 March 2022 (extended from 31 March 2021) was approved.
• On the date of loan approval, the person does not own any other residential property. He/she is a first-time buyer.
• The person should not be eligible to claim deduction under Section 80EEA if he/she claims deduction under Section 80EEA.   

Joint Home Loan Deduction   

In case of a loan taken jointly, each borrower can claim a deduction in his/her tax return on home loan interest up to Rs 2 lakh each and on repayment under Section 80C up to Rs 1.5 lakh individually. To claim this deduction, you must also be a co-owner of the property you have taken out a mortgage on. Taking out a mortgage with a family member can provide you with even greater tax savings.