Section 24b of the Income Tax Act plays a crucial role in helping home loan borrowers reduce their tax liabilities. This section allows you to claim deductions on the interest paid on your home loan, which directly lowers your taxable income. By using Section 24b of the Income Tax Act, borrowers can claim significant deductions, making homeownership more affordable. Whether you’re buying, constructing, or renovating a property, this section provides a practical way to manage your finances while enjoying tax benefits.
Understanding Section 24b
Section 24b of the Income Tax Act helps home loan borrowers by offering tax benefits on the interest they pay. If you have a home loan, you can reduce your taxable income through this section, which means you pay less tax.
You can claim up to ₹2 lakh as a deduction each year if you self-occupy the house. For rented properties, you can deduct interest without any limit, but you can cap the total loss from “Income from House Property” at ₹2 lakh.
To claim this benefit, you must take a loan to buy, build, or fix a house. However, if you do not complete the construction within five years, the deduction limit drops to ₹30,000.
Eligibility for Deductions under Section 24b
Section 24b of the Income Tax Act allows home loan borrowers to claim tax deductions on the interest they pay. Whether you have taken a loan for buying, building, or renovating a house, you may be eligible for these benefits.
Eligibility for Deductions:
- Self-occupied properties: You can claim up to ₹2 lakh per year as a deduction.
- Rented properties: You can deduct interest without any limit, but you can cap the total loss under “Income from House Property” at ₹2 lakh.
- Loans for construction or purchase: You can avail the full deduction as long as you complete the construction within five years.
- Loans for renovation or repairs: A maximum deduction of ₹30,000 per year applies.
Key Rules and Limits for Deductions Under Section 24b
To claim deductions under Section 24b of the Income Tax Act, certain conditions must be met. These rules ensure that only eligible borrowers can benefit from the tax savings on home loan interest.
Conditions for Claiming Deductions:
- Loan Purpose: The loan should be taken for buying, constructing, or renovating a house.
- Time Limit: For construction or purchase loans, the construction must be completed within 5 years from the end of the financial year in which the loan was taken.
- Ownership: The borrower must be the owner of the property to claim deductions.
Deduction Limits:
- Self-occupied Properties: You can claim a deduction of up to ₹2 lakh annually.
- Rented Properties: There is no limit on the interest deduction, but the total loss from “Income from House Property” is capped at ₹2 lakh.
Impact on First-Time Home Buyers
First-time home buyers receive additional tax benefits under Section 24b of the Income Tax Act. These benefits can be combined with other sections like Section 80EE to increase the total deductions available.
Impact on First-Time Home Buyers:
- Higher Tax Deductions: Under Section 24b, first-time home buyers can claim up to ₹2 lakh on home loan interest.
- Extra Deduction with Section 80EE: You can also claim an additional ₹50,000 under Section 80EE, provided the loan amount does not exceed ₹35 lakh and the property value is ₹50 lakh or less.
- Combined Savings: By using both Section 24b and Section 80EE, first-time buyers can save up to ₹2.5 lakh in taxes.
How to Claim Deductions?
Claiming deductions under Section 24b is a simple process if you follow the right steps. Here’s a quick guide to help you claim these deductions when filing your income tax returns:
How to Claim:
- Gather Required Documents: Collect all the necessary documents like the home loan interest certificate and loan repayment proofs from your lender.
- Include Interest Deduction in Income Tax Return: When filling out your ITR (Income Tax Return) form, look for the section labelled “Income from House Property.” Enter the interest amount paid for the financial year under this section.
- Self-Occupied Property: If the property is self-occupied, claim a deduction of up to ₹2 lakh.
- Rented Property: For rented properties, there is no limit on interest deduction, but the total loss from “Income from House Property” is capped at ₹2 lakh.
- Submit Your Return: After entering all details, review your ITR form and submit it online or offline.
Required Documents:
- Home Loan Interest Certificate: This certificate shows the interest paid during the financial year.
- Loan Repayment Proofs: These proofs confirm that you have made regular payments towards your home loan.
Benefits of Section 24b for Joint Home Loan Borrowers
Joint home loan borrowers can take advantage of Section 24b to maximise their tax savings. When two or more people take a joint home loan, each co-borrower can claim a deduction on the interest they pay, provided they meet certain conditions.
Benefits for Joint Borrowers
- Separate Deduction Limit: Each co-borrower can claim a deduction of up to ₹2 lakh on interest payments for self-occupied properties. This means the total deduction can be up to ₹4 lakh if both borrowers claim the maximum amount.
- Ownership Requirement: To claim the deduction, both borrowers must also be co-owners of the property.
- Proportional Deduction: The deduction can be split between co-borrowers based on their share of the loan repayment. For example, if one person pays 60% of the EMI, they can claim 60% of the interest deduction.
Conclusion
Section 24b of the Income Tax Act lets home loan borrowers save on taxes by claiming deductions on interest paid, whether the property is self-occupied or rented. Joint borrowers can maximize benefits, with up to ₹2 lakh deductible for self-occupied homes, making homeownership more affordable.
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Frequently Asked Questions
Section 24b of the Income Tax Act limit allows a deduction of up to ₹2 lakh per year on home loan interest for self-occupied properties.
You can find Section 24b in the ITR form under the “Income from House Property” section to claim home loan interest deductions.
You can claim up to ₹2 lakh annually for self-occupied properties under Section 24b.
Home loan borrowers who have taken loans for purchase, construction, or renovation of a house can claim deductions under Section 24b.
Yes, each co-borrower can claim up to ₹2 lakh separately under Section 24b if they are co-owners.
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