What are the tax benefits of home loans?

Tax benefits can be claimed on both the principal and interest components of the home loan as per the Income Tax Act, 1961. These deductions are available to assessees, who have taken a loan to either buy or build a house, under Section 24(b).

(A) Interest on borrowed capital is deductible as follows:

1. If the following conditions are satisfied, interest on borrowed capital is deductible up to Rs 150,000.

• Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property.
• The acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed.
• The person, extending the loan, certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principle amount outstanding under an earlier loan taken for such acquisition or construction.

2. If the conditions stated above are not satisfied, then the interest on borrowed capital is deductible up to Rs 30,000. However, the following conditions have to be fulfilled:

Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or renewal of a house property.

Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property.

If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3 years from the end of the year, in which capital is borrowed

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