Contact Us | Log In
Sensex: 32596.5 -409.80 Gold: Rs.30880.00
Nifty: 9998.05 -116.75 Silver: Rs.38863.00
How Home Loan With Tax Deductions Is A Lucrative Deal -
How Home Loan With Tax Deductions Is A Lucrative Deal
elearnmarkets | Published: 24 Jul, 2017  | Source :

How we wish to have a genie in our life. How we wish that with the blink of an eye our dreams true.

So what would you dream of? – A dream home may be. Apart from our preferable location, floor area, preferable layout and similar aspects, the major discouraging factor that keeps our dream home on hold is the ever escalating real estate prices.

We may have to save for a substantial period of time to be able to purchase/ construct our dream nests.  Alternatively, if we choose to take a home loan, the idea of enjoying our dream home will materialize today.

Taking a home loan is an icing on the cake itself, because you can also enjoy the tax benefits on the principal amount, interest paid, as discussed at length below, under the Income Tax Act, 1961.

Let us know more about the deductions that can be claimed under the Income Tax Act, 1961:

How to avail the tax benefits?

Repayment of monthly installments:

In case you pay the monthly installments in respect of the loan taken for the purchase or construction of a house, then the principal component of the total installment in that respect can be claimed as a deduction under section 80C of the Income Tax Act, 1961.

Since the total limit under section 80C of the Income Tax Act, 1961 is Rs. 1.5 lakh, the maximum amount that can be claimed is limited to the said amount.

Interest component:

Apart from the principal amount, you can also claim the interest component of the total installment amount.

In case of construction, the interest amount can be claimed in the year in which construction is completed.

Let us take an example to understand this:

Mr. A completes the construction of a house on September 30, 2014. Hence, he will be able to claim the interest deduction for the entire financial year 2014-15. In this regard, in case Mr. A uses the house for his residential purposes, a maximum of Rs. 2 lakh can be claimed for the financial year 2014-15 onwards. In case the house is rented, Mr. A can claim the entire amount as a deduction.

Pre-construction interest:

Pre construction interest means the interest paid before completion of construction. Apart from the post construction interest, you can also claim pre construction interest in five equal instalments limited to Rs. 2 lakh in case of self-occupied house for residential purposes.

Stamp duty:

Apart from the deduction that can be claimed on monthly installments including principal and interest components, you can also claim a deduction on the stamp duty and registration charges, subject to the condition that the deduction shall be allowed in the year the amount is paid.

Apart from the above incentives, the government also provides additional tax benefits by inserting sections vide respective Finance Act year to year.

Most interestingly, the mission of Housing for all by 2022 is giving strong impetus to the real estate sector. Apart from banks, several housing finance institutions are being approved by National Bank of India to propagate the aforementioned mission.

So don’t wait much to get your dreams come true! Prune your strategy well and go ahead to materialize your action plan. For more details visit Tax Planning for Financial Planners (

Happy Learning!


  Read full report Click here to read the full report

About elearnmarkets is a young vibrant company established with the vision of taking online financial education to a new level, both in India and abroad. Guided by their mission of spreading financial literacy, they are constantly experimenting with new education methodologies and technologies to make financial education convenient, effective, and accessible to all. They provide courses on basic finance, Fundamental Equity research, Technical analysis, Economics, Derivatives, Currencies and Commodities and many of their courses are conducted by reputed market experts and certified by leading exchanges like NSE, MCX and NCDEX.

For more information please write in to

Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.