Tax savings for Home loan interest under Section 24 B
Raj Pradhan | 02 April 2013

The principal amount in the repayment of a home loan can be added to the 80C limit of Rs1.5 lakh for tax savings. The interest component of home loans is allowed as deduction under Section 24 B for up to Rs2 lakh in case of a self-occupied house. In case the house is in the joint name of your spouse and you (joint loan), each one can avail of Rs2 lakh interest component deduction. The best part is that this limit is only for self-occupied house. If you have property which is rented out, you can deduct the full interest paid on the home loan. The rent on the property does become part of your income. If the rent is lesser than the loan interest, it will lower your overall tax liability. In any case, interest on loan offsets the rental income which is good for tax savings. For joint loan and self-occupied home, it is important to show the loan repayment by both husband and wife as they can avail of Rs2 lakh each on loan interest deduction. If the EMI (equated monthly instalment) is being paid from one account by ECS (electronic clearing service), pay your contribution of loan repayment to your spouse by cheque. It will help in case of IT assessment. In case your spouse does not have any income, only you can take Rs2 lakh loan interest deduction.

You can avail of both the benefits of Home loan and HRA if you are paying rent on your accommodation and have also taken a home loan on your own home. This is subject to your home receiving rental income which is taxable.
Union Budget 2013-2014 raised tax deduction limit by Rs1lakh for the first time home loan takers to promote the housing sector. A person taking a loan for his first home from a bank or a housing finance corporation up to Rs25lakh during the period 1 April 2013 to 31 March 2014 will be entitled to an additional deduction of interest of up to Rs1lakh. If the limit is not exhausted, the balance may be claimed in 2015-16. This deduction will be over and above the deduction of Rs2 lakh allowed for self-occupied properties under section 24 of the Income-tax Act. The move is likely to promote home ownership and give a fillip to a number of industries including steel, cement, brick, wood, and glass besides providing jobs to thousands of construction workers.