Home loan insurance not only safeguards your family from loan liabilities but also offers significant tax benefits under Sections 80C and 24 of the Income Tax Act. By understanding the rules and eligibility for home loan insurance tax benefits, you can maximize your savings while securing your financial future.
This blog explains everything you need to know about claiming these benefits effectively.
Tax Benefits of Home Loan Insurance
Home loan insurance premiums qualify for tax deductions under Section 80C of the Income Tax Act, 1961.
- Section 80C: Deduction of up to ₹1.5 lakh per annum on principal repayment, including home loan insurance premiums.
- Section 24(b): Deduction of up to ₹2 lakh per annum on interest paid for self-occupied property; no upper limit for rented properties.
- Section 80EE: Additional deduction of up to ₹50,000 per annum for first-time homebuyers meeting specific criteria.
- Section 80EEA: Further deduction of up to ₹1.5 lakh per annum for affordable housing, over and above Section 24(b) benefits.
Note: Tax benefits are subject to change based on annual budget announcements.
Also Read: Home Loan Tax Benefits
Latest Updates and Changes in Tax Rules 2025
In Budget 2025, significant changes were introduced affecting home loan insurance and related tax provisions in India.
| Tax Feature | Details |
|---|---|
| ULIP Taxation | Returns taxed as capital gains if premiums exceed 10% of sum assured. |
| Section 80C Benefits | Premiums paid for life insurance policies are eligible for deductions up to ₹1.5 lakh per annum. |
| Section 24(b) Clarifications | Interest on home loans for self-occupied properties is deductible with specific limits. |
| Standard Deduction Revised | Standard deduction under the new tax regime increased, providing enhanced tax relief. |
| Home Loan Benefits Under New Regime | Home loan interest deductions now available under the new tax regime. |
These changes aim to simplify tax compliance and provide clearer benefits for home loan insurance and related investments.
Read More: Which Tax Regime to Choose as a New Home Buyer?
Eligibility Criteria for Home Loan Insurance Tax Benefits
To claim home loan insurance tax benefits, you must be the policyholder and the home loan borrower, with premiums paid from your own income.
| Criteria | Details |
|---|---|
| Home Loan Borrower | The borrower of the home loan is eligible for tax benefits. |
| Insurance Policy | You must have a life insurance policy linked to the home loan (e.g., home loan insurance policy). |
| Premium Payment | The premium paid for the home loan insurance policy is eligible for tax deductions under Section 80C. |
| Section 80C Eligibility | You can claim a deduction of up to ₹1.5 lakh per year under Section 80C for premiums paid. |
| Property Type (Self-Occupied or Rented) | Tax benefits on home loan insurance apply whether the property is self-occupied or rented. – Self-occupied: Up to ₹2 lakh per year on home loan interest. – Rented: No upper limit on interest deduction. |
| Loan Purpose | The home loan must be for purchasing, constructing, or renovating a residential property. |
| First-Time Homebuyer (Section 80EE) | First-time buyers can claim an additional deduction of up to ₹50,000 for home loan interest under Section 80EE. |
| Affordable Housing (Section 80EEA) | If purchasing affordable housing (₹45 lakh or less), claim an additional deduction of ₹1.5 lakh under Section 80EEA. |
| Income & Age Criteria | No specific age or income criteria for eligibility, but the deduction depends on the individual’s taxable income. |
| Insurance Premium Payment Date | To claim tax benefits, the premium for the home loan insurance must be paid before the end of the financial year (March 31st). The payment must be documented in a way that can be shown during tax filing. |
How to Claim Tax Benefits on Home Loan Insurance Premiums
Claiming tax benefits on home loan insurance premiums is a straightforward process, but it requires you to follow certain steps and ensure that all necessary documentation is in order.
Below is a step-by-step guide on how to claim these benefits in India.
Time needed: 3 minutes
- Ensure You Have a Home Loan Insurance Policy
The policy must cover your home loan and be linked to it.
- Pay Premiums on Time
Only premiums paid during the financial year (April 1st to March 31st) qualify for tax benefits.
- Keep Premium Payment Receipts
Retain receipts of premium payments for proof.
- File Your Income Tax Return (ITR):
In your ITR, claim the deduction under Section 80C for premiums paid. The maximum deduction allowed is ₹1.5 lakh per year.
- Attach Necessary Documents
Though you don’t need to submit receipts with the ITR, keep them handy in case of tax department scrutiny.
- Submit ITR on Time
Ensure timely filing to avoid penalties.
Also Read: ITR Filing Guide: Simple Steps & Complete Checklist
Rules for Claiming Tax Benefits on Home Loan Insurance
To claim tax benefits on home loan insurance, you must ensure the policy is linked to the loan, and premiums are paid from your taxable income.
| Criteria | Description |
|---|---|
| Home Loan Insurance Policy | The insurance must cover the home loan. |
| Premium Payment | Only premiums paid within the financial year (April 1st to March 31st) qualify. |
| Section 80C Deduction | Claim up to ₹1.5 lakh per year under Section 80C for home loan insurance premiums. |
| Eligibility | Only the borrower of the home loan can claim the tax benefit. |
| Proof of Payment | Keep premium payment receipts as proof for tax filing. |
| Home Loan Purpose | Must be for purchasing, constructing, or renovating a residential property. |
| First-Time Buyers | Additional benefits may apply under Sections 80EE and 80EEA for first-time homebuyers. |
Also Read: Maximizing Income Tax Benefits for Home Buyers
How to Calculate Tax Benefits on Home Loan Insurance?
You can calculate tax benefits on home loan insurance by applying the applicable tax rate to the premium paid under Sections 80C and 24(b) of the Income Tax Act.
- Identify the Premium Paid: Find the total premium paid for the home loan insurance in the financial year.
- Check Section 80C Limit: You can claim up to ₹1.5 lakh per year under Section 80C for home loan insurance premiums.
- Claim the Deduction: If the premium is ₹50,000, you can claim ₹50,000. If it’s ₹2 lakh, you can claim a maximum of ₹1.5 lakh.
- Report in ITR: Include the premium paid under Section 80C when filing your Income Tax Return (ITR).
Example:
- Premium Paid: ₹60,000
- Eligible Deduction: ₹60,000 (under Section 80C)
- Taxable Income: If your taxable income is ₹8,00,000 and you claim ₹60,000 deduction, your new taxable income will be ₹7,40,000, reducing your tax liability.
Check Out: Home Loan Tax Benefits Calculator
Home Loan Insurance Benefits
Home loan insurance provides financial security for loan repayment in case of the borrower’s death, helping protect the family and the property.
- Loan Protection: Ensures the outstanding loan is cleared in case of the borrower’s death.
- Tax Benefits: Premiums are eligible for tax deductions under Section 80C.
- Peace of Mind: Reduces financial burden on family members after the borrower’s demise.
- Coverage for Home Loans: Covers both principal and interest amounts of the home loan.
- No Impact on Property: The lender will not claim the property in case of borrower’s death if insurance is in place.
- Financial Security: Reduces the financial burden on dependents, preventing them from defaulting on loan repayments.
- Lender Assurance: Protects the lender’s interest by ensuring the home loan is repaid, even if the borrower is no longer able to do so.
Also Read: Home Loan Insurance for Green Homes
Best Home Loan Insurance Policy in India
Top home loan insurance policies in India, such as LIC Home Loan, New India Assurance, Bajaj Allianz, HDFC ERGO and ICICI Lombard Home Loan Insurance, provide essential coverage for borrowers, ensuring the loan is repaid in case of death, disability, or critical illness.
- Hybrid Home Loan Insurance Plans: This type of policy offers a fixed coverage amount for the first year. After that, the coverage adjusts each year based on the remaining loan balance, as the loan gets paid down.
- Level Cover Plan: With this plan, the coverage amount stays the same throughout the entire loan period, offering consistent protection.
- Reducing Property Insurance for Home Loans: In this plan, the insurance coverage decreases as the loan balance reduces. As you pay off your EMIs, the coverage amount decreases accordingly.
Check Out: Home Loan Insurance Premium in India
Conclusion
Home loan insurance is not just a safety net for your family but also a smart way to save on taxes. By understanding the rules and eligibility for home loan insurance tax benefits, you can maximize your savings while securing your home loan.
Frequently Asked Questions
Yes, home loan insurance premiums are eligible for tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh per year.
No, home insurance premiums are not tax deductible under the Income Tax Act, 1961, unless they are linked to a home loan insurance policy.
Yes, you can claim home loan insurance premiums for tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh per year.
Home loan insurance premiums are eligible for tax deduction under Section 80C, not 80D, of the Income Tax Act.
Yes, taking home loan insurance is beneficial as it provides financial protection for your family by covering the outstanding loan in case of your unforeseen death or disability.
No, home loan insurance premiums are generally non-refundable, as they are paid for coverage during the loan tenure.
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