How Much Tax Benefits Of A Home Loan:

Tax benefits can be claimed on both the principal and interest components of the home loan as per the income tax Act, 1961

. These deductions are available to assesses, who have taken a loan to either buy or build a house, under Section 24(b).As per Sec 24(b) of the income Tax Act, 1961 a deduction up to Rs. 1,50,000 can be claimed. This deduction is claimed towards the total interest that one would pay on the home loan towards purchase or construction of house property while computing the income from house property.

As per Section 80C read with section 80CCe of the Income Tax Act, 1961 the principal repayment up to Rs 1,00,000 on the home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions. This can further reduce the tax liability by about Rs 30,000 p.a.

Let us consider a hypothetical example.

Taxable Income: Rs 8,00,000.

Principal repayment for the same year: Rs 1,40,000 and interest payable for the year: Rs 2,10,000

Total Deductions allowed: Rs 2,50,000 (Rs 1,50,000 towards interest payable and Rs 1,00,000 for principle repayment of the loan)

Thus, the taxable income will reduce to Rs 5,50,000 (Rs 8,00,000 Rs 2,50,000).

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