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Top tax benefits you can claim on home loan repayment

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  Published in House and Home on Monday, October 20th 2025 at 12:14 GMT by moneycontrol.com
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Maximising Your Home‑Loan Tax Benefits in India: A Comprehensive Guide

India’s tax regime offers a host of incentives for homeowners, encouraging the purchase of residential properties while easing the financial burden of home‑loan repayments. Moneycontrol’s recent piece, “Top tax benefits you can claim on home‑loan repayment,” consolidates these provisions into a practical checklist for borrowers. Below is a detailed summary that unpacks the key deductions, eligibility criteria, and strategic considerations highlighted in the article.

1. Interest Deduction Under Section 24(b)

Self‑Occupied Property
Homeowners who live in the house can claim a deduction of up to ₹2 lakh per annum on the interest paid on a residential loan. This ceiling applies regardless of the loan’s size or the actual interest amount paid.

Let‑Out Property
For properties that are rented out, the interest deduction limit rises to ₹5 lakh per year. Importantly, the entire rental income must be declared; only the difference between rental income and interest can be written off.

Key Takeaway
Even if the interest paid exceeds ₹2 lakh (or ₹5 lakh for let‑out properties), the deduction is capped at these thresholds. Consequently, borrowers often take advantage of the “tax‑friendly” limit by timing the loan repayment or by opting for a higher principal amount early in the tenure to spread interest over the years.

2. Principal Repayment Under Section 80C

Maximum Deduction
The principal component of a home‑loan repayment qualifies as a tax‑saving investment under Section 80C, with a ceiling of ₹1.5 lakh per year. This limit is shared across other 80C instruments such as Provident Fund, life insurance, ELSS, and PPF.

First‑Time Home‑Buyer Bonus (Section 80EE)
Borrowers purchasing their first property can claim an additional deduction of up to ₹1 lakh on principal repayment, provided the loan amount does not exceed ₹30 lakh and the property cost is within ₹45 lakh (₹50 lakh for second‑home purchase). The interest component, however, is still capped at ₹2 lakh under Section 24(b).

Strategic Implication
A common misstep is to treat the principal repayment as a sunk cost, failing to track it for Section 80C. Tax professionals recommend maintaining a dedicated ledger that flags each principal installment, ensuring that the cumulative deduction does not exceed the ceiling.

3. Home Loan Interest Tax Credit for Senior Citizens

Senior citizens (aged 60 + years) can claim a higher interest deduction cap of ₹5 lakh on a self‑occupied property, provided they meet the following conditions:
- The loan is secured against a property acquired before 2017.
- The interest amount is actual, not calculated via a formula.

This extension is particularly valuable for retirees who wish to consolidate debts or fund health expenses. The article advises consulting a chartered accountant to verify eligibility, as the rule is not automatically applied by banks.

4. Tax Benefits on Home Loan for Renters

The article clarifies that while the interest deduction for let‑out properties can be as high as ₹5 lakh, this benefit is contingent on the property being rented out for a minimum of 12 months in the fiscal year. A “rent‑to‑own” arrangement, where the lease is not in the taxpayer’s favour, does not qualify.

Additionally, the article emphasizes the importance of filing a separate income‑tax return under “rental income” if you are a property owner but not a primary taxpayer, ensuring that the tax credit is correctly attributed.

5. Additional Provisions and Practical Tips

Practical Tip 1: Keep Track of Both Interest and Principal
Create a spreadsheet that logs every EMI component. Use the “Interest” column to claim under Section 24(b) and the “Principal” column under Section 80C (or 80EE).

Practical Tip 2: Re‑evaluate Property Status
If you move into the property or rent it out, adjust your claims accordingly. Switching from a self‑occupied to let‑out status can change your maximum deduction from ₹2 lakh to ₹5 lakh for interest, but may trigger additional rental income tax.

Practical Tip 3: Leverage the First‑Time Home‑Buyer Bonus
If you’re purchasing your first home, do not overlook the 80EE deduction. Even a ₹1 lakh benefit can significantly lower the effective interest rate.

Practical Tip 4: Plan Loan Repayments Strategically
Borrowers often aim to repay the loan in a staggered manner, paying higher principal portions early in the tenure to capture the 80C deduction while also reducing the interest base for subsequent years.

6. Navigating Common Pitfalls

• Misinterpreting the Interest Cap: Claiming more than ₹2 lakh (or ₹5 lakh for let‑out) will lead to disallowance by the tax department.
• Ignoring Rental Income Disclosure: Failing to report rental income can trigger penalties, even if you claim the full ₹5 lakh deduction.
• Forgetting the Age Clause for Senior Citizens: The ₹5 lakh interest deduction for seniors applies only if the loan is secured against property purchased before 2017.
• Not Using the 80EE Bonus: Many first‑time buyers miss the additional ₹1 lakh deduction because they are unaware of the loan and property cost ceilings.

The Moneycontrol article underscores the importance of a meticulous record‑keeping system and timely filing of returns to fully exploit these tax advantages.

7. Final Thoughts

Home‑loan tax benefits are a powerful tool for homeowners, reducing the effective cost of borrowing and boosting savings. By understanding the distinct provisions of Sections 24(b), 80C, and 80EE, and by aligning repayment strategies with tax rules, borrowers can optimize their financial outcomes. The article advises consulting a tax expert or chartered accountant for personalized advice, especially when property status changes mid‑tenure or when senior‑citizen benefits are in play.

Overall, the Moneycontrol piece serves as a practical roadmap for navigating India’s complex tax landscape surrounding home‑loans, making it easier for homeowners to claim the full spectrum of deductions and enjoy the fiscal relief that comes with owning a house.