Buying a home is one of the biggest dreams for anyone and most of us. It’s not just about having a roof over your head but also about making a space full of happiness, smiles, and space that feels like your own home. However, purchasing a home can be financially difficult and it often leads to taking a home loan, which can feel overwhelming at first. The good news is that the government of India offers several tax benefits and deductions on home loans, which can help you save a lot of money. We will look into how you can make the most of these tax benefits in 2025, and how companies like BigMudra Home Loans can help you achieve your dreams of having a home.
What Are Home Loan Tax Benefits?
When you apply for a home loan, you are not just paying back the amount you borrowed but you are also paying interest on that loan. The government understands that this can be a financial hardship, so they offer tax benefits on both the principal amount and the interest you pay. These benefits are designed to help you get more affordable home loans and encourage people to buy their own homes.
Tax Benefits on Home Loans
When you take a home loan, the repayment consists of two main parts:
- Principal Amount – The actual loan amount borrowed.
- Interest Amount – The cost paid to the lender for borrowing money.
The government allows tax benefits on both these amounts under different sections of the income tax act.
1. Deduction on Principal Repayment – Section 80C
In India, under section 80C of the income tax act, you can claim a deduction of up to 1.5 lakh per year on the principal amount of repayment on your home loan. This deduction applies to:
- Home loans taken for purchasing or constructing a residential property.
- Repayments made towards home loan principal.
- Stamp duty and registration charges (if not separately claimed).
However, there is a condition on this act, you can only claim this benefit only if you do not sell your house within 5 years of possession. If you sell your house before 5 years, the deduction claimed earlier will be added back to your taxable income.
2. Deduction on Interest Paid – Section 24(b)
Under section 24(b) of income tax act, you will be allowed to claim a tax deduction of up to 2 lakh per year paid on the interest on your home loan. This benefits applies to:
- A home loan taken for purchasing, constructing, or renovating a house.
- Self-occupied homes (maximum deduction ₹2 lakh).
- Rented-out properties (no limit on interest deduction)
If the construction of your house is not completed within 5 years from the date of home loan sanction, in this case you can only claim a deduction of ₹30,000.
3. Additional Deduction for First-Time Home Buyers – Section 80EE
This is a valuable tax benefit if you are a first time home buyer, you can claim an additional tax deduction of ₹50,000 under section 80EE. To be eligible
- The loan amount should be ₹35 lakh or less.
- The property value should not exceed ₹50 lakh.
- The home loan must be taken from a recognized financial institution.
This deduction is over and above the benefits of Section 80C and Section 24(b).
4. Additional Deduction Under Affordable Housing Scheme – Section 80EEA
To make it easy for people and to encourage affordable housing solutions, the government has introduced section 80EEA, which provides an additional tax benefit of 1.5 lakh on interest payments. To be eligible for:
- The home loan must be sanctioned between April 1, 2019, and March 31, 2025.
- The property’s stamp duty value should be ₹45 lakh or less.
- The taxpayer should not own any other residential property.
This deduction is over and above Section 24(b), helping homebuyers save more on taxes.
How to Claim Home Loan Tax Benefits?
If you want to claim tax benefit on your home loan, follow these easy steps:
- Obtain Home Loan Interest Certificate: To claim tax benefit, obtain this document from your lender that shows the interest paid and principal amount paid during the financial year.
- Report the Details in Income Tax Return (ITR): While filing your ITR, include these details in the appropriate sections.
- Submit Documents to Employer (if salaried): if you are an employee and salaried person submit your home loan interest certificate to your employer for adjustment in form 16.
Keep Proper Records: Maintain all home loan-related documents for future reference and verification.
How BigMudra Helps You Get a Home Loan Easily?
BigMudra offers easy and secure home loan solutions. You can get easy financial assistance for buying or constructing your dream home with its quick home loan approval process. BigMudra home loan, personal loan, or a business loan, you can enjoy various benefits, including:
- Instant Personal Loan Without Collateral – Get funds quickly without pledging any asset.
- Online Loan Application Guide – Apply easily from the comfort of your home.
- Competitive Interest Rates – Affordable loan options to reduce your repayment burden.
Flexible Repayment Options – Choose a repayment plan that suits your financial condition.
Conclusion
Understanding about home loan tax benefits and deductions can help you save a lot of money on your taxes. By using these benefits effectively, you can reduce your overall cost of your home loan. These sections mentioned above offer various tax benefits that make buying a home more affordable.
If you are planning to take a home loan in the future or ready to take a home loan, consider BigMudra for a smooth and quick loan approval process which is paperless. Whether you need a home loan, personal loan, or Business loan, you can rely on BigMudra services for hassle-free financial assistance.