In India, home loan borrowers can claim tax exemptions on both the principal and interest components of the loan under the Income Tax Act of 1961. These exemptions are available under the following sections:
- Section 80C: Home loan borrowers can claim deductions on the principal repayment of the home loan under this section. The maximum deduction allowed under this section is Rs. 1.5 lakh per annum.
- Section 24: Home loan borrowers can claim deductions on the interest paid on the home loan under this section. The maximum deduction allowed under this section is Rs. 2 lakh per annum for a self-occupied property. For a rented or leased-out property, there is no upper limit on the amount of interest deduction that can be claimed.
It is important to note that these tax exemptions are available only if the home loan has been taken for the purpose of purchasing or constructing a residential property. In addition, the property should not be sold within five years of possession, as this may result in the tax benefits being reversed.
Home loan borrowers are required to submit relevant documents, such as loan statements and interest certificates, to claim tax exemptions on their home loans. It is recommended to consult a tax advisor or financial expert for guidance on claiming home loan exemptions in income tax.