How to Declare Home Loan in Income Tax: A Step-by-Step Guide
Jan 28, 2025
Owning a home is a lifelong dream for many, often made possible through a home loan. While repaying a home loan can be a significant financial commitment, it also offers several tax benefits that can ease your burden.
This article is your step-by-step guide to declaring your home loan in your income tax returns. Learn how to claim home loan rebates, understand the applicable tax deductions, and maximise your savings effectively.
Home Loan and Income Tax: A Step-by-Step Guide
A home loan offers dual benefits: it helps meet your financial needs and provides tax relief under the Income Tax Act, 1961. Knowing how to declare your home loan in income tax returns (ITR) is essential to make the most of these benefits. Here’s a step-by-step guide:
- Identify Tax Benefits: Understand the tax deductions available for both the principal and interest components of your home loan.
- Collect Necessary Documents: Obtain the loan statement from your lender, which details the principal and interest paid during the financial year.
- Fill in the Correct Sections: Declare the deductions in the relevant sections while filing your ITR.
- Verify with Form 16: If you're a salaried individual, ensure your employer accounts for these deductions in Form 16.
Tax Benefits on Home Loans
Below are the key tax benefits available on home loans:
- Deduction on Interest Paid (Section 24(b)): You can claim a deduction of up to INR 2 lakhs on the interest paid for a rented or self-occupied property, provided the construction or acquisition of the self-occupied property is completed within five years from the end of the financial year in which the loan was taken.
- Deduction on Principal Repayment (Section 80C): The principal amount repaid during the financial year is eligible for a deduction of up to INR 1.5 lakhs, subject to the overall limit of Section 80C.
- Additional Deduction on Interest Paid (Section 80EEA): If you took a home loan between 1st April 2019 and 31st March 2020 and did not own any other residential property at the time of the loan sanction, you can claim an additional deduction of up to INR 1.5 lakhs on the interest paid. The stamp duty value of the property must not exceed INR 45 lakhs.
- Additional Deduction on Interest Paid (Section 80EE): Under this provision, you can claim an additional deduction of up to INR 50,000 on the interest paid on a home loan if the loan was taken between 1st April 2016 and 31st March 2017. To qualify, you should not own any other property at the time of the loan sanction, and the value of the property should not exceed INR 50 lakhs. Additionally, the loan amount must not exceed INR 35 lakhs.
How to Declare a Home Loan in Your ITR
Here are the general steps involved in declaring your home loan in income tax returns:
- Gather Required Documents:
- Home loan statement from your lender.
- Proof of ownership and possession of the property.
- Certificate of interest paid during the financial year.
- Select the Right ITR Form:
- For salaried individuals, ITR-1 is commonly used.
- For income from let-out properties, use ITR-2 or ITR-3.
- Declare Interest Under Section 24(b):
- Navigate to the "Income from House Property" section.
- Enter the interest paid during the financial year on your home loan.
- Claim Principal Repayment Under Section 80C:
- In the deductions section, enter the principal amount repaid during the financial year.
- Include Additional Deductions, If Applicable:
- Claim Section 80EEA and 80EE benefits, if applicable.
- Review and File:
- Ensure that all details are accurate.
- Submit your ITR online and retain the acknowledgement for future reference.
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In Summary
Declaring a home loan in income tax is a systematic process that allows you to avail of significant tax savings. By understanding the tax benefits available under various sections and accurately reporting them in your ITR, you can maximise your savings and ease your financial burden.
At SMFG Grihashakti, we simplify your homeownership journey with tailored home loan solutions. Access loans of up to INR 1 crore* or 90%* of the property value at competitive interest rates as low as 10%* per annum.
Use our home loan eligibility calculator to estimate how much loan you may qualify for and apply online today!
FAQs on Home Loan Rebate
Can I claim tax benefits on a home loan for an under-construction property?
Yes, you can claim tax benefits on the interest paid during the construction period, but only after the property is completed. The interest paid during this period can be claimed in five equal instalments starting from the year of possession.
Can both co-borrowers claim tax benefits on a joint home loan?
Yes, both co-borrowers can claim deductions on interest and principal repayment in proportion to their ownership share in the property, subject to the limits specified under Sections 24(b) and 80C.
Is there a tax benefit on home loan prepayment?
Yes, prepayment of the principal is eligible for deductions under Section 80C, while prepayment of interest qualifies under Section 24(b).
What happens if I forget to declare my home loan in Form 16?
You can still claim the tax deductions when filing your Income Tax Return (ITR). Ensure that you have all the necessary documents, such as the certificate of interest paid, to support your claims.
Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.