Tax efficiency 101: How to maximise income tax benefits on home loans

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₹2 lakh on the interest paid on the loan each year, reducing your taxable income. Moreover, the repayment of the principal amount can also lower your taxable income by up to ₹1.5 lakh annually. Under the old tax regime, first-time homebuyers opting for a home loan can benefit from tax deductions to reduce their tax burden.

According to Pramod Kathuria, Founder and CEO of Easiloan, under Section 80EEA of the Income Tax Act 1961, they can claim an additional deduction of up to ₹1.5 lakh on the interest paid towards home loans. This deduction exceeds the existing deductions allowed under Section 24(b) and Section 80EE for home loan interest. Additionally, Kunal Varma, CEO and Co-founder at Freo, stated that first-time home buyers could claim an extra deduction of ₹50,000 on interest paid under Section 80EE, provided the loan amount is less than ₹35 lakh, and the property value does not exceed ₹50 lakh.

Women borrowers usually get lower interest rates on home loans, which can greatly reduce the total borrowing cost. Furthermore, in some states, properties registered in a woman's name may have lower stamp duty rates, leading to additional tax savings, Kunal Varma noted. To maximise tax benefits, borrowers should ensure they maintain timely and accurate documentation of their payments, consider making prepayments on their loans to reduce the total interest outlay, and seek advice from tax professionals to plan their deductions across various financial instruments effectively.