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How To Claim Home Loan Interest In Income Tax Return

mahindra-finance-author

by Mahindra Finance

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April 18, 2024

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4 mins read

Owning a home is a dream for many, but the journey often involves taking a home loan. The good news is that you can claim tax benefits on the interest you pay on your home loan. Understanding how to claim home loan interest in ITR (Income Tax Return) can significantly reduce your tax burden, putting more money back in your pocket. 

This guide explains the process in simple steps and explains key terms like "Section 24(b)" so that you can confidently claim your ITR home loan interest deductions. 

We'll also share valuable tips to help you maximise your tax benefits and how to claim interest on home loans. 

Understanding section 24(b)

Claiming home loan interest in ITR benefits falls under Section 24(b) of the Income Tax Act. This section allows you to deduct a portion of the interest you pay on your home loan from your taxable income.

Eligibility: As an individual residing in a self-occupied property purchased with a home loan, you are eligible for these deductions.

Maximum deduction limit: Currently, you can claim up to ₹2 lakhs for self-occupied properties and ₹5 lakhs for let-out properties.

Filing process

Now that you understand the basics, let's dive into the process of claiming an ITR home loan interest:

  1. Choose your filing method: You can file your tax return online through the Income Tax e-filing portal or offline by submitting paper forms.
  2. Select the right ITR form: Based on your income source and tax liability, choose the appropriate ITR form.
  3. Navigate to Schedule EI: This schedule captures all income deductions, including interest on home loan tax deductions.
  4. Fill in the details: Provide accurate information from your loan agreement and Form 16, including the loan amount, interest paid, and property details.
  5. Verify and submit: Double-check all the information meticulously before submitting your return electronically or physically.

Tips for maximising tax savings

Maximising your tax savings requires careful planning and attention to detail. Here are some tips to optimise your benefits:

  1. Keep detailed records: Maintain copies of your loan agreement, Form 16, and property documents for easy access during filing.
  2. Timely repayments: Ensure you make your EMI payments on time as overdue interest is not deductible.
  3. Consider joint ownership: If you own the property jointly, remember to mention the proportion of interest paid by each borrower when claiming deductions.
  4. Professional assistance: Consulting a tax advisor can be helpful if you have a complex situation or need personalised guidance.

Empowering your financial journey

Claiming a home loan and tax benefit is a smart way to reduce your tax burden while making your homeownership journey more financially rewarding. By understanding the process, staying organised, and seeking help when needed, you can maximise your tax benefits for home loan interest and enjoy the peace of mind that comes with informed financial decisions. Remember to stay updated on the best home loan interest rates and be aware of the limit of home loan interest in income tax.

Conclusion

In conclusion, claiming home loan interest in your ITR is an important step towards reducing your tax burden and optimising your finances. By following the steps outlined in this guide and implementing the tips provided, you can confidently claim your home loan interest deductions.

It's time to take control of your financial journey. Explore Mahindra Finance for personalised solutions that align with your financial goals like the best home loan interest rates. Start maximising your tax benefits today!

FAQs

Q1: Can I claim home loan interest on a property that is under construction?

A: Yes, you can claim interest paid during the pre-construction period as a deduction in five equal instalments.

Q2: Are there any limits on the amount of home loan interest that can be claimed?

A: Yes, currently, the maximum deduction allowed for home loan interest under Section 24(b) is ₹2 lakhs per financial year for self-occupied properties.

Q3: What documents do I need to claim home loan interest deductions?

A: You need loan statements, interest certificates, and completion certificates from the lender to claim home loan interest deductions.

Q4: Can I claim home loan interest if the property is rented out?

A: Yes, interest paid on a home loan for a rented property is eligible for deduction under Section 24(b) of the Income Tax Act.

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