Budget 2025 And Income Tax: Section 24b To Section 80C, Key Deductions Available On Home Loans

Buying a house is no small feat. It takes many an entire lifetime to achieve this dream. With the Budget 2025 only a fortnight away, prospective homebuyers are seeking changes in the government policy that could potentially turn their dream into a reality. Among the many demands is raising the limit of Rs 2 lakh a year under Section 24(b) for deduction on interest paid for home loans.

As the property prices continue to soar, it is important to be aware of the deductions that can be claimed on home loans and know how to maximise the benefits available under the Income Tax Act, 1961.

A quick look at the key home loan deductions that can be claimed under different sections based on the type of the loan:

Section 24b: Deduction for interest paid on home loan

Under this section, a homebuyer can claim a deduction of up to Rs 2 lakh a year on the interest paid on the borrowed amount in the case of a self-occupied property. If the property is rented to another party, there is no cap on the deduction that can be claimed. The full amount that has been paid as interest can be claimed as deduction on one's rental income.

If the loan was taken for the construction of a house, then the construction should be completed within five years from the end of the financial year during which the loan amount was disbursed. If the construction time takes more than 5 years, one can claim deduction on the interest payment only up to Rs 30,000.

Section 80C: Deduction on principal repayment

One can claim a deduction of up to Rs 1.5 lakh on an annual basis for the payment made towards the principal amount of the loan borrowed for buying the property. This also includes deduction for stamp duty and registration. Section 80C also comes with other deductions under some eligible investments like PPF, ELSS, among others.

Section 80EE: First-time home buyers

If you have made your first home purchase, you are eligible to claim an additional deduction of up to Rs 50,000 on an annual basis on the interest paid. However, there are certain conditions that one needs to keep in mind for this deduction. These are:

-The loan must have been approved between April 1, 2016, and March 31, 2017.

-The loan amount is a maximum of Rs 35 lakh.

-The value of the property purchased with the loan is Rs 50 lakh or less.

Section 80EEA: First-time home buyers

Besides the Rs 50,000 under 80EE, first-time homebuyers also have the benefit of a deduction of up to Rs 1.5 lakh, if: the property value is Rs 45 lakh or less, the loan was approved between April 1, 2019, and March 31, 2022, and the taxpayer has not claimed any deduction under Section 80EE.