Purchasing your home is a dream come true. The Government of India supplies different tax benefits on home loans to encourage you to invest in a property under the Income Tax Act of 1961. You should know how to show interest on a home loan in an income tax return for your savings.
These advantages reduce your tax bill and help your cash flow better. You should be conscious of all the home loan tax benefits, as they help you save a considerable amount of your tax payments.
A home loan includes principal and interest repayments that qualify for tax deductions. Your Principal repayment of a house loan is deductible under Section 80C, whereas the interest portion is allowed as a deduction under Section 24(b) of the Income Tax Act, 1961.
Let us dive deep into how to show interest on a home loan in an income tax return.
Where does interest show on a home loan in ITR?
Your home loan to avail of your dream house has many benefits.
You can show both the interest and principal amount of your home loan while filing your returns. It helps to deduct your taxable amount.
You can claim the interest on your home loan under sections 24 and 80EEA of ITR. You can claim a deduction of up to Rs.2 lakh on the interest paid on your home loan if you occupy your house.
How much can we show home loan benefits in income tax?
You can avail of tax benefits for your home loan. You can avail of benefits for both your principal and interest repayment of your home loan.
You can file these deductions while filing your ITR.
The principal and interest payments are deductible under different sections.
The limits are as follows:
- Up to INR 2 lakhs u/s 24 if you occupy your house
- Up to INR 1.5 lakhs u/s 80C
- Up to INR 1.5 lakhs u/s 80 EEA if you buy a home for first-time
Where to show interest on housing loans in ITR-1?
You can file ITR-1 with your home loan details with interest on your home loan. Under the personal information tab, fill in all your personal and income details including your home loan details.
In the income sources tab, input all of your taxable salaries. Find the taxable income in your Form 16 and enter the information of your employer and the TDS amount.
You can follow these simple steps to file ITR-1
- Enter your permanent data like Name, Date of Birth, and PAN number.
- Select the Income Sources tab and add your income details. You can also upload your Form 16 to add your information directly.
- Discover your Taxable income in your Form 16.
- Enter the Salary TDS amount and details of your employer — If you changed jobs during the year, add another salary.
- Next, add your other income like Interest from Bank Accounts, Fixed Deposits, Gifts, and others.
- Declare the exempt incomes, if any, like Mutual Funds.
- If you have a home loan on a self-occupied House Property, declare interest on the loan, enter your home address, and specify co-owners, if any.
- Enter the sum of your Section 80C deductions
Thus, you completed your ITR-1 filing, which includes a deduction of interest from your home loan.
Where to show interest on housing loans in ITR-2?
If you are eligible to file ITR-2 as you meet the conditions to file your returns, you have no other option than to file ITR-2.
ITR-1 is very simple and easy to file. However, ITR-2 is similar to ITR-1. You need to answer a few questions regarding your capital gains before filing ITR-2.
But in both forms, you can deduct your home loan interest under tax exemptions. You can use Section 80EE and Section 24 in a similar manner in both the ITR forms to deduct your tax.
FAQ- How to show interest on a home loan in an income tax return?
1. Is interest on a home loan taxable?
Yes, Your home loan interest is taxable indeed. However, you can claim a deduction on this interest under sections 24 and 80 EEA.
If you occupy your own house, the interest paid on your home loan is eligible for a deduction of up to Rs.2 lakh.
If you leave it to rent, the entire amount of your interest is deductible.
2. Can I claim both 80EE and section 24?
Yes, you can claim a deduction under both Section 80EE and 24 if you meet the conditions under both sections.
If you buy a home for the first time, you can claim a tax deduction under Section 80EE of the Income Tax Act 1961. The maximum deduction you can claim under this section is Rs. 50,000 during a financial year.
You can claim this over and beyond the deduction of Section 24 and Section 80C, which are Rs. 2,00,000 and Rs. 1,50,000, respectively.
Under Section 24, you can claim a deduction of up to Rs.2 lakh for the interest you pay on your home loan. However, this is possible if you occupy your home.
Thus, you can claim both Section 24 and 80EE if you are eligible for both.
3. Can I claim income tax exemption on a home loan without an occupancy certificate?
The local authorities issue an occupancy certificate for your home/building. It certifies that you completed the construction work as per the approved plan and your building is ready for occupation. It also certifies that you have constructed your property abiding by local laws.
It’s a mandatory document that confirms your ownership.
If you fail to own an occupancy certificate, your property is considered illegal by the local municipal body.
So, to avail of tax exemption for your home loan, you should provide an occupancy certificate for your home. If you fail to provide this certificate, it leads to the illegal property, and you cannot file deductions either.
Your dream may now come true by availing of a home loan. Both the Principal and interest components of your home loan are liable for tax deductions. Your interest on your home loan can be used as a deduction in your ITR which helps to reduce your taxable income. Sections 24 and 80EEA allow you to claim How to show interest on a home loan in an income tax return. You can claim a deduction of up to Rs.2 lakh on the interest paid on your home loan if you occupy your house.
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