Home Loan Tax Calculations

1. Deduction of Interest Paid on Housing Loan

• A home loan must be taken for the purchase/construction of a house and the construction of the house must be completed within 5 years.
• It has two components – Interest payment and Principal repayment.
• The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh under Section 24
• Additional exemption of upto Rs. 50,000 under Section 80EE

Conditions for claiming 80EE

• Value of this house should be Rs 50 lakhs or less
• Loan taken for this house must be Rs 35 lakhs or less
• The loan must be sanctioned between 01.04.2016 to 31.03.2017*
• As on the date of the sanction of loan, no other house property must be owned by you.

2. Deduction on Principal repayment

• The Principal portion of the EMI paid for the year is allowed as deduction under Section 80C.
• The maximum amount that can be claimed is up to Rs 1.5 lakh

Note: 

The house property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to your income in the year of sale.

Example:

If Ram taken a house loan. Total Loan Value: 5 Lakh, Year: 10 Year

During FY 2018-19, he pay total 80,000/- as loan amount from that Interest Amount: 30,000/- and Principal Amount: 50,000/-.

Adjustment:

In 24B: 30,000/-  (limit upto 2 lakh)

80C: 50,000/-   (limit upto 1.5 lakh)

Some tables for easy understanding

Type of Property	Self Occupied Property		Not Self Occupied Property
Completion Status	Completed within 5 years	Not completed within 5 years	Completed within 5 years	Not completed within 5 years
Deduction Allowed	Rs. 2,00,000	Rs. 30,000	No Limit	No Limit

Particulars	Section 24	Section 80C
Tax Deduction allowed for	Interest	Principal
Type of Property	Any Real Estate Property	Only Residential House Property
Basis of Tax Deduction	Accrual basis	Paid basis
Quantum of Tax Deduction allowed	Self Occupied Property:Rs. 2,00,000. Non Self Occupied Property: No Limit	Rs. 1,50,000
Purpose of Loan	Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.	Purchase / Construction of a new House Property
Eligibility for claiming Tax deduction	Purchase/ Construction should be completed within 5 years	Nil
Restriction on Sale of Property	Nil	Tax Deduction claimed would be reversed if Property sold within 5 years

Particulars	Quantum of Deduction (Rs.)
	Self Occupied Property	Non-Self Occupied Property
Section 24	2,00,000	No Limit
Section 80C	1,50,000	1,50,000
Section 80EE	50,000	50,000