12/20/2017 Tax Benefit on Home Loan – FY 2017-18, AY 2018-19

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Last Updated 20th Dec 2017

Home Loan Tax Bene t FY2017-18, AY2018-19

Tax On Principal Repaid On Interest Paid

Bene ts

First Home – Actual principal repaid subject to a Actual home loan interest paid subject to a
Self maximum of Rs. 1,50,000 (Rs. 2 lakh for maximum of Rs. 2 lakh (Rs. 3 lakh for senior
Occupied senior citizens) can be claimed as
citizens) if house construction completed
investment eligible for tax deduction under
section 80C. within 5 years from the end of the nancial year
in which loan is taken
If construction of house not completed within
ve years then Rs. 30,000 is tax exempt
Additional exemption of upto Rs. 50,000 on
interest paid for loans upto Rs. 35 lakh with
cost of home upto Rs. 50 lakh.

First Home – Upto Rs. 1,50,000 (Rs. 2 lakh for senior For current assessment year 2018-19:
Rented/ citizens) eligible for tax deduction under Exemption on interest has been capped at
Vacant Section 80 C. The deduction is available only
lower of two, a) Rs. 2,00,000 or b) actual
(deemed to if the property owner is staying in a different
be let out city for work. interest paid for all properties owned by a tax
property) payer.

Second None For current assessment year 2018-19:

Home or Exemption on interest has been capped at
Additional
lower of two, a) Rs. 2,00,000 or b) actual
Property
interest paid for all properties owned by a tax
payer

Under None The interest paid can be claimed in equal parts

Constrn. in ve nancial years post completion or
handing over of property within the overall
annual limit of Rs. 2 lakh.

Tax Bene t on Home Loan Principal Repayment

For rst residential property which is self occupied, rented or vacant

How to avail home loan tax exemption
Principal repayment of up to Rs. 1.5 lakh (Rs. 2 lakh for senior citizens) can be clubbed under the overall limit for tax
saving instruments eligible under Section 80C to claim tax bene t of upto Rs. 50,985 per annum
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12/20/2017 Tax Benefit on Home Loan – FY 2017-18, AY 2018-19

Deduction available for purchase or construction of rst residential property which is self occupied or is rented as
the tax payer has to live in a different city due to his work
Any amount paid towards partial or full prepayment of home loan is also eligible for tax bene t

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Tax Bene t on Home Loan Interest

For rst self occupied home

How to avail home loan tax exemption
Annual interest component of up to Rs. 2 lakh (Rs. 3 lakh for senior citizens) can be claimed as deduction against
income under section 24
Tax liability can be reduced by upto Rs. 67,980 depending upon your tax slab
Additional exemption of up to Rs. 50,000 can be claimed as deduction against income from FY 2016-17 and AY
2017-18 on rst home provided the sanctioned loan amount is upto Rs. 35 lakh and cost of house is upto Rs. 50
lakh
Available for purchase/ construction/ repair/ renewal/ reconstruction of a residential house property
Bene t available only for self occupied property
Deduction is available on an accrual basis and not on a payment basis. Hence, deduction under Section 24 can be
claimed on yearly basis even if no payment has been made during the year but interest has accrued

For under construction property before possession

According to Section 24 of IT Act, you can claim deduction against the interest amount that you have paid on your
residential property during the pre construction period.

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12/20/2017 Tax Benefit on Home Loan – FY 2017-18, AY 2018-19

Similar Deduction not available on principal repayment under Section 80C, for payments done during pre
construction period
Total interest paid during the pre construction period can be claimed as tax deductible in ve equal installments
during ve successive years from the year in which construction is completed and property is handed over to you.
Total allowable deduction stands capped at Rs. 2 lakh per year for self occupied house.
There is no limit on interest that can be claimed as tax deductible in case of let out property and deemed to be let
out property for Assessment Year 2017-18. However, from AY 2018-19, there will be a limit of Rs 2 lakh on amount
of total interest that can be claimed against income from let out or deemed to be let out property
Tax deduction during construction period is not allowed for loan taken for repair or renewal of a residential property.

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For rented or vacant property

Tax treatment on vacant property
Vacant property - As per Income Tax rule (Section 24), you will be required to account for deemed rent on the
property as taxable income. Deemed rent is notional rent based on market rental values in the vicinity. Interest paid
on loan taken to buy the property can be set off from the taxable income. In FY16-17 (AY 17-18), 100% of the
interest is eligible for deduction on such properties. Starting from FY17-18 (AY18-19), the interest bene t cannot
exceed Rs. 200,000 per individual.
Property not self occupied for reason of employment, business or profession in different place or other city - As
per Income Tax Rule (Section 24) tax deduction allowed is capped at Rs. 2 Lakh.
Property is part self occupied and part is rented out - The interest must be spilt in proportion of the size of the two
parts and tax bene t shall be split proportionately.

How to avail tax exemption

In case you own more than 1 property, one of which is self occupied and others are rented out or lying vacant, till
Assessment Year 2016-17, entire interest paid on such property can be set it off from rent received or deemed rent
on such properties
In case the interest on home loan together with other deductible expenses (such as repairs, house tax, standard
deduction of 30% on rented property etc) is higher than rental income/ deemed rental income, the loss can be
adjusted against other income heads including salary income, business income, interest income; thus reducing the
overall tax liability.
In case there is unabsorbed loss even after these adjustments, same can be carried forward for up to 8 years to be
adjusted against taxable income in future years.
Starting FY2017-18 (AY 2018-19)- the maximum set off for interest paid on all properties, including self occupied,
rented and vacant properties has been capped at Rs. 200,000 per taxpayer, irrespective of the number of properties
owned by the individual.

Joint home loan tax bene t : for co-applicant, co-borrower and joint owner
If the home loan that you have taken is in joint names then you can save more tax as compared to when you have
taken home loan individually.

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12/20/2017 Tax Benefit on Home Loan – FY 2017-18, AY 2018-19

Each applicant and the co-applicants (any number) can avail tax bene t individually for a property in which they are
joint owners
Each applicant and co-applicant can separately claim a maximum tax deduction of Rs. 1.50 lakh per annum for
principal repayment under Section 80C and Rs. 2 lakh per annum for interest payment, under Section 24. However,
the total tax bene t by all joint owners cannot exceed the total principal repayment and interest payment during the
year.

Budget 2017-18 for AY 2018-19

In the union budget announced on 1st Feb 2017, the Finance Minister has made three signi cant changes with
respect to income tax bene t on home loan and capital gains on sale of house property.

Change in long term capital gains de nition - Upto 31st Mar 2017, any property sold within 3 years of purchase
used to attract short term capital gains tax at marginal tax rate (30%). Starting FY 2017-18, a house property sale
will qualify under long term capital gains if it is held for a minimum period of 3 years instead of 2 years and hence,
be eligible for concessional tax rate of 20% with indexation bene t or 10% without indexation bene t. Further, the
long term capital gains so accrued shall continue to be eligible for tax exemption by way of investment under
capital gains bonds under section 54E. For more, refer to

MyLoanCare Capital Gains on Property Guide 2017

Maximum interest exemption for tax bene t on home loan capped at Rs 2 lakh including that on rented property -
Earlier, interest paid on capital borrowed to purchase a house or any other property for investment purpose
(property that was not self occupied but was let out or lying vacant) was eligible to be set off from rental income
without any limit. Further, loss as a result of interest expense being more than the rental income was eligible to be
set off from income under any head such as salary, business or interest. From FY 2017-18 and AY 2018-19, the
maximum allowable deduction for interest on house property has been capped at Rs. 200,000 (Rs. 2 lakh only).This
limit of Rs. 2 lakh is applicable to each tax payer and is the maximum deduction available for interest paid on all
properties owned by the tax payer. However, this provision is not applicable for entities that are in the business of
owning real estate.
For more details, refer to the latter part of this page under the heading "Deduction of interest paid on home loan
taken to purchase a property that is either rented out or not self occupied."
TDS on rent paid by individuals – So far, only the corporate entities were required to deduct TDS at 10% on rent paid
in excess of Rs. 2 lakh per annum. As per Budget 2017, effective 1st June 2017, individuals, professionals and
businessmen will also be required to deduct TDS at the rate of 5% on rent paid in excess of Rs. 50,000 per month.
For more details on TDS rates, refer to

MyLoanCare TDS Guide 2017

Budget 2017 has reduced income tax on individuals. For details refer to

MyLoanCare Income Tax Slabs Guide 2017

There is no change in tax bene ts on home loan as per budget presented on Feb 1st 2017 applicable for nancial
year 2017-18 and assessment year 2018-19 as compared to previous year.

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