Claiming Home Loan Interest Beyond Form 16: Using Section 24(b)
- Nimisha Panda
- Jul 10
- 9 min read
Section 24(b) of the Income Tax Act provides significant tax benefits for individuals who have taken a home loan. It allows taxpayers to claim deductions on the interest paid on home loans under the head "Income from House Property." This section plays a vital role in reducing the taxable income of individuals and encouraging home ownership. Home loan interest deductions can lead to substantial savings, especially in the case of long-term loans. Let us understand the key provisions of Section 24(b), the eligibility criteria, and how you can claim home loan interest deductions beyond Form 16. We'll also look at the recent updates regarding home loan tax benefits and the differences between the new and old tax regimes in the context of these benefits.
Table of Contents
Understanding Section 24(b): Key Provisions
Section 24(b) of the Income Tax Act allows a deduction on the interest paid on a home loan taken for the purpose of purchasing, constructing, repairing, renewing, or reconstructing a residential property. This section is specifically designed to ease the financial burden of taxpayers with home loans by providing relief through tax benefits.
Deduction Amount: The maximum deduction that can be claimed is up to ₹2,00,000 per year on the interest paid on a home loan. This applies to loans taken for the purchase or construction of a residential property.
Conditions: The property for which the loan was taken must be a self-occupied property or let-out property. The loan must be repaid during the year for which the deduction is claimed. Additionally, the home loan interest deduction can be claimed only if the taxpayer is liable to pay the interest on the loan.
Interest and Pre-Construction Period: For properties under construction, the interest on the home loan during the pre-construction period can be claimed in five equal installments, starting from the year in which the construction is completed.
Claiming Home Loan Interest Beyond Form 16
Form 16 is a TDS certificate issued by your employer that summarizes your taxable income and the tax deducted at source. However, Form 16 does not reflect details about deductions like home loan interest unless it has been explicitly included by your employer. To claim the home loan interest deduction under Section 24(b), you must provide additional details while filing your Income Tax Return (ITR).
Incorporating Home Loan Interest in ITR: To claim the deduction, you must report the interest paid on the home loan in the ITR form under the head "Income from House Property." This information should be entered in the section where you report the details of your property, specifically under the deduction claim for home loan interest.
No Employer Deduction: If you do not get the benefit of home loan interest deduction through your employer's payroll, you can still claim it while filing your return. Make sure to gather all documents that prove you have paid interest during the financial year.
Additional Claims: Home loan interest deductions can be claimed on the property you live in or let out, as long as the loan is in your name. For jointly owned properties, the deduction can be split between co-owners based on the loan repayment share.
Eligibility for Claiming Home Loan Interest
To be eligible to claim a deduction on home loan interest under Section 24(b), the following conditions must be met:
Ownership of the Property: The taxpayer must own the property for which the loan was taken, or must be in the process of acquiring the property.
Repayment of the Loan: The taxpayer must have paid the interest on the home loan during the financial year for which they are claiming the deduction.
Type of Property: The home loan must be taken for the purpose of purchasing, constructing, repairing, or renewing a residential property.
Taxpayer’s Liability: Only the person who is liable to repay the loan and who is the legal owner of the property can claim the deduction.
Documentation Required to Claim Home Loan Interest
To claim home loan interest deductions, proper documentation is essential. The required documents include:
Loan Statement from the Bank or Financial Institution: This statement shows the principal and interest components of your loan repayment during the year.
Certificate of Interest Paid: Some banks and financial institutions issue a certificate showing the amount of interest paid during the year.
Home Loan Agreement: The agreement between you and the bank or financial institution, which specifies the loan amount, repayment schedule, and interest rates.
Property Documents: Proof of ownership of the property for which the loan was taken, such as the sale deed or allotment letter.
Completion Certificate (if applicable): If you are claiming interest on a property under construction, a completion certificate from the builder is required.
Is Home Loan Interest Deduction Allowed in the New Tax Regime?
Under the new tax regime introduced in Budget 2020, taxpayers can opt for lower tax rates in exchange for giving up most of the exemptions and deductions available under the old tax regime, including the home loan interest deduction.
No Deduction in New Regime: Taxpayers who opt for the new tax regime cannot claim deductions under Section 24(b) for home loan interest. However, taxpayers who do not mind foregoing this deduction and who benefit more from the lower tax rates may choose the new tax regime.
Comparing Regimes: If your home loan interest deduction is significant and would substantially reduce your taxable income, staying in the old tax regime may be more beneficial.
How Home Loan Interest Works in the Old Tax Regime
Under the old tax regime, taxpayers can claim up to ₹2,00,000 as a deduction for home loan interest under Section 24(b). This deduction applies regardless of the type of property (self-occupied or let-out) and can significantly reduce the tax burden for homeowners.
Self-Occupied Property: If the property is self-occupied, the entire interest amount paid during the year can be claimed as a deduction, subject to the ₹2,00,000 limit.
Let-Out Property: If the property is rented out, the entire interest paid on the loan is deductible, and the rental income is assessed under "Income from House Property."
Recent Updates on Home Loan Tax Benefits
There have been several recent updates on home loan tax benefits that impact taxpayers. Key changes include:
Increase in the Deduction Limit for First-Time Homebuyers: The government has introduced additional deductions for first-time homebuyers under section 80EE and 80EEA. These deductions provide relief of up to ₹50,000 for first-time homebuyers on loans taken for the purchase of affordable homes.
Affordable Housing Schemes: The government has announced a 100% deduction on interest paid on loans for affordable housing under specific schemes like PMAY (Pradhan Mantri Awas Yojana).
Interest Deduction During Pre-Construction: The ability to claim pre-construction interest on home loans in five equal installments post-construction completion has been an important update for taxpayers with under-construction properties.
Conclusion:
Claiming home loan interest beyond Form 16 is a straightforward process if you understand Section 24(b) and keep the necessary documentation ready. By ensuring that you report the deduction correctly in your ITR, you can reduce your tax burden. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: Can I claim home loan interest if I don’t live in the property?
Yes, you can claim home loan interest on a let-out property under Section 24(b) of the Income Tax Act, even if you do not reside in the property. As long as the loan is taken for the purpose of purchasing or constructing the property, you are eligible for the deduction, provided the property is rented out. The interest paid on the home loan can be claimed as a deduction under the "Income from House Property" head.
Q2: Can I claim home loan interest on a second property?
Yes, home loan interest can be claimed on a second property as well, provided the property is used for residential purposes and you meet the eligibility criteria. If the second property is self-occupied or rented, you are eligible to claim a deduction under Section 24(b). If the property is let-out, the full interest on the home loan can be claimed as a deduction from the rental income, reducing the taxable income.
Q3: Do I need to submit proof of payment for claiming home loan interest?
Yes, to claim home loan interest under Section 24(b), you must submit proof of payment. This typically includes the loan statement issued by the bank or financial institution showing the interest paid during the financial year. Some lenders also issue a certificate specifying the total interest paid, which should be kept for tax filing purposes.
Q4: Is there a limit to how much home loan interest I can deduct?
Yes, the maximum deduction available under Section 24(b) for home loan interest is ₹2,00,000 per year for a self-occupied property. For a let-out property, there is no cap on the amount of interest you can claim as a deduction. If the property is under construction, the interest paid during the construction phase can be claimed in five equal installments once the construction is completed.
Q5: Can I claim home loan interest in the new tax regime?
No, the new tax regime does not allow any exemptions or deductions, including home loan interest deductions under Section 24(b). If you opt for the new tax regime, you must forgo deductions like home loan interest, HRA (House Rent Allowance), and other tax-saving investments, in exchange for lower income tax rates.
Q6: How can I claim home loan interest for a property under construction?
For a property under construction, you can claim the home loan interest in five equal installments after the construction is completed. The total interest paid during the construction phase is accumulated and divided into five parts, which can be claimed starting the year after the completion of the construction. The total interest paid during the construction period will be treated as a pre-construction interest, which is claimed over a period of five years.
Q7: What documents are required to claim home loan interest?
To claim home loan interest, you need the following documents:
Loan statement from the bank or financial institution showing the interest paid.
A certificate of interest paid issued by the lender.
Proof of property ownership, such as sale deed or possession certificate.
For under-construction properties, a completion certificate from the builder or local authority is also required to claim the interest.
Q8: Can I claim both home loan principal and interest deductions?
Yes, you can claim both home loan principal and interest deductions, but under different sections. The interest paid on a home loan can be claimed under Section 24(b) of the Income Tax Act, while the principal repayment can be claimed under Section 80C. The principal repayment deduction is subject to the overall limit of ₹1.5 lakh under Section 80C, which includes other deductions like PPF, EPF, and insurance premiums.
Q9: What happens if I don’t have Form 16 but want to claim home loan interest?
If you do not have Form 16 (which is typically provided by an employer), you can still claim home loan interest by including the deduction in your ITR. Form 16 is primarily issued by employers to their employees, and is not a requirement for claiming home loan interest. What you do need is proof of interest paid from your lender, such as a loan statement or certificate of interest paid, which you can submit when filing your ITR.
Q10: Are there any tax benefits for first-time homebuyers?
Yes, first-time homebuyers can claim additional tax benefits under Section 80EE and Section 80EEA. Section 80EE allows a deduction of up to ₹50,000 on the interest paid for a home loan, provided certain conditions are met, such as the loan being sanctioned between April 1, 2016, and March 31, 2017. Section 80EEA offers additional benefits, providing a deduction of up to ₹1.5 lakh on the interest for home loans taken for affordable housing, subject to certain conditions. These deductions are in addition to the regular home loan interest deduction under Section 24(b).
Q11: How does the home loan interest deduction work if I own a joint property?
If the home loan is jointly taken, both co-owners can claim the deduction for the interest paid, in proportion to their respective share of the loan repayment. For example, if two individuals are joint owners and borrowers, each can claim up to ₹2,00,000 on the interest paid, provided they are both contributing equally to the loan repayment. The ownership and repayment share must be clearly defined in the loan agreement, and the deduction should be claimed based on this proportion.
Q12: Can I claim home loan interest for a property I rent out?
Yes, if you rent out a property, you can claim the full home loan interest deduction under Section 24(b). The rental income from the property will be taxed under the "Income from House Property" head, and the interest on the home loan can be deducted from the rental income to reduce the taxable income. This helps reduce the overall tax liability on rental income, making it an advantageous option for property investors.
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