How To Declare a Home Loan in Income Tax in 2024

As the tax season is nearing 2024, you may be preparing to file your ITR (Income Tax Returns) and looking for different ways to reduce your overall tax liability, right? Well, while paying taxes is your obligation, you would know that paying taxes takes away a significant amount of your disposable income.

But there are different ways to reduce your tax burden by taking advantage of the different deductions available to you as guaranteed by the Income Tax Act, 1969. For example, if you have taken a home loan, you can declare the same in your income tax filings in 2024 and claim deduction on both the principal and the interest.

If you are not sure how to declare a home loan in income tax and how to get a home loan tax benefit, don’t worry! In this blog, we will discuss the steps you must follow.

There are four steps to get tax benefits on home loan, which are mentioned below:

 

Step 1 – Keep all the important documents handy

When filing income tax, you must keep all the important documents, like bills, receipts and home loan papers, handy. And, to get the deductions on the home loan, you must have the following details handy beforehand to avoid last-minute hassles:

• Property ownership details – To claim a deduction on the home loan, you must be the sole or co-owner of the property. And, if you jointly own the house, you must be aware of the percentage of your share or ownership as you can claim the deduction only equal to your ownership percentage.
• Completion of construction or date of purchase – You can claim tax deduction on the interest aspect of the home loan only after the construction of the house is completed. If you purchase a ready-to-move flat, you must know the exact date of purchase.
• Borrower details – Just like the property must be in your name, the home loan must also be in your name to claim the tax benefits. You can either take the loan individually or jointly with your spouse or any other immediate family member.
• Certificate from the lender – You must get a certification from the lender which clearly states the interest and the principal amount details.
• Municipal taxes paid – To claim a deduction on the home loan, you must have regularly paid the property tax. Also, you can claim this amount as a deduction if you have rented out your property.\

 

Step 2 – Submit the documents to your employer

If you claim tax benefit on home loan interest, you must inform your employer about it so that they can adjust the TDS (Tax deducted at source) accordingly. This also helps you avoid waiting till the end of the year to know your actual tax liability, and you can adjust your taxes accordingly.

If you are self-employed, you don’t have to submit these documents anywhere. However, you must determine your tax liability in advance for every quarter of a year.

 

Step 3 – Calculate the income from home

If you have self-occupied the property, the maximum deduction you can claim is Rs. 2 Lakh. However, if you have rented out the house, there is no limit on the amount of interest you can claim as a deduction. From financial year 2017-18, the deduction on home loan interest for rent property is limited to the extent of the loss of such property, not exceeding Rs. Lakh.

Here is a simple method to calculate the income from house property

Income from house property = Gross value of the property, i.e., the rental value minus municipality taxes paid minus deduction on home loan

 

Step 4 – Claim the deduction on the home loan principal and interest amount repayment

You can claim a deduction of up to Rs. 1.5 Lakh under Section 80C, and also claim a deduction on the interest repayment up to Rs. 2 Lakh under Section 24(b). If you are a first-time home buyer, you can claim an additional deduction of up to Rs. 50,000 under Section 80EE, provided you meet the following conditions:

• Your home loan amount is not more than Rs. 35 Lakh

• The value of the home you purchased is not more than Rs. 50 Lakh

Choose the right lender to avail a home loan

With so many ways to reduce your tax burden on your home, it can be confusing for you to take maximum advantage of the deductions available to you. Hence, it is paramount that you choose the home loan lender carefully. It is better to apply for a home loan with only a reputable lender who can guide on how to get income tax benefit on home loan and help you understand the home loan-related tax laws.

This will allow you to fulfil your dream of purchasing a house and save a considerable amount on tax payments.