How first-time home buyers can get up to ₹5 lakh tax rebate

The Income Tax Act offers tax deductions on the interest and principal components of a home loan under different sections and the total tax deduction that one can avail on a home loan can add up to 5 lakh.

Deduction on principal

Under the overall tax deduction ceiling of 1.5 lakh of Section 80C, a borrower can avail deduction on the repayment of principal on a home loan. The conditions are that the loan should only be taken from a financial entity falling under the purview of RBI or from your employer, which is central or state government, a public or public sector company, university or co-operative society. Also, this deduction is not available till the house is under construction and if you sell the property within 5 years, the rebate claimed will be added to your income and taxed.

Deduction on interest

Section 24 allows deduction of up to 2 lakh on the interest paid towards a home loan taken for a self-occupied property and full interest is deductible for a let-out property. This deduction can be claimed only after the construction of the house is complete. Interest paid during the construction phase, if any, can be claimed in five instalments after the completion of construction.


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Over and above section 24, additional deduction of up to 1.5 lakh on the interest component is allowed under section 80EEA. This provision was introduced in Union Budget 2019 for affordable homes and comes laden with many conditions.

“The loan should have been sanctioned by a bank, banking company or housing finance company between 1 April 2019 and 31 March 2022, the stamp duty value of the property should not exceed 45 lakh and the home buyer should not own any residential house property on the date of sanction of loan,” said Sandeep Jhunjhunwala, partner, Nangia Andersen LLP.

There’s no specific mention in the finance bill whether a home loan taken on an under-construction property qualifies for deduction under section 80EEA or not. “Whenever the law disallows certain conditions, it is specifically mentioned under the concerned section, as is the case with Section 24 and Section 80C. So, deduction under 80EE can be claimed if the property is under-construction,” said Karan Batra, founder,

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