How to claim tax exemption on Loan Principal and Interest?

We all plan to purchase properties when we are financially sound to pay the home loan EMI. However, not many of us are aware of the tax benefits that we can claim out of the home loan that we apply for while we buy a property. In our previous posts we have discussed about how you can claim HRA and tax benefits if you have a home loan for the property you have just purchased.

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Today we are going to understand how you can claim tax exemption on loan principal and interest.

When it comes to tax breaks on the applied home loan, you are eligible to claim tax benefits only for the principal of the loan amount before the completion of your house. On the completion of your house, you are then eligible to claim tax benefits on the total interest paid till the date of completion of the house. In case where the house is let out, the entire interest paid on home loan can be deducted.

Tax Exemption on Loan Principal and Interest

The interest that is paid on a home loan is not deducted directly from the salary income for home loan. The calculation of income from house property is done for each house that the individual owns. A self employed person is eligible to avail tax benefit for the rent that he pays for his residence and can claim the deduction under section 80GG of Income Tax Act. Here, no HRA exemption is available in case of a self employed individual.

A tax payer can avail the following tax benefits on home loans:

1. If you have applied for a home loan and you want to repay the principal amount on home loan, then the principal amount will be deducted from gross total income. In case the house is let out, the deduction for the entire interest paid on home loan is available.
2. Tax benefit on interest payment. 
3. Additionally, interest paid on home loan during the pre-construction period, i.e., period prior to the financial year in which house is purchased or constructed can also be claimed as deduction. 

We shall discuss about how you can claim both, the HRA and the home loan tax benefits together in our upcoming post. Till then stay tuned!

Read More:

1. HRA and Tax Benefits from Home Loans?
2. Confused how home loans can get you Tax benefits?
3. Homes that are well connected!