How to Declare Home Loan in Income Tax: Complete Guide to Claiming Deductions

Learning how to declare home loan in income tax can help borrowers claim deductions worth up to ₹3.5 lakhs annually. Section 80C allows a total of ₹1.5 lakhs deduction on principal repayment. Section 24(b) permits up to ₹2 lakhs deduction on interest for self-occupied properties. First-time buyers can also claim an additional ₹50,000 under Section 80EEA for loans sanctioned between April 2019 and March 2022. 

Principal Repayment Deduction Under Section 80C 

Section 80C allows deduction for home loan principal repayment up to ₹1.5 lakhs annually. This limit is shared with other 80C investments (PPF, ELSS, life insurance, etc.). The deduction applies from the year possession is received. 

Requirements: 

If the property is sold within 5 years, claimed deductions are added back to income in the sale year. 

Interest Deduction Under Section 24(b) 

Section 24(b) provides home loan income tax deduction on interest paid: 

For self-occupied properties, the ₹2 lakh limit applies regardless of actual interest paid. Higher interest payments provide no additional benefit beyond this cap. 

Additional Deductions for First-Time Homebuyers 

Section 80EE: For loans sanctioned between April 2016 and March 2017 

Section 80EEA: For loans sanctioned between April 2019 and March 2022 

These sections provide benefits beyond Section 24(b) limits for qualifying borrowers. For a detailed breakdown of available housing loan exemptions under each section, refer to the dedicated guide. 

Stamp Duty and Registration Charges Under Section 80C 

Stamp duty and registration fees paid for property purchase qualify for Section 80C deduction in the payment year. This is separate from principal repayment but shares the ₹1.5 lakh overall limit. Claim these charges in the year paid, typically the purchase year. Keep payment receipts for documentation. 

Lenders issue interest certificates by April - May each year for the previous financial year. 

Submitting Documents to Employer for TDS Adjustment 

Salaried employees can reduce TDS by submitting home loan documents to employers: 

This provides a monthly tax benefit rather than waiting for an ITR refund. Submit declarations during the employer’s tax planning window (typically January - February). 

Filing the Deduction in ITR Form 

Home loan tax declaration in ITR involves multiple sections: 

For Interest (Section 24b): 

For Principal (Section 80C): 

Declaration Process for Salaried vs Self-Employed 

Salaried individuals (ITR-1 or ITR-2): 

Self-employed individuals (ITR-3 or ITR-4): 

Step-by-Step: Interest Under Section 24(b) 

Claiming Pre-Construction Interest 

Interest paid during the construction period (before possession) is deductible in 5 equal annual instalments starting from the possession year. 

Example: ₹3 lakhs pre-construction interest 

Track pre-construction interest separately for accurate claiming. 

Interest Benefits for Self-Occupied and Rented Properties 

Understanding these distinctions optimises home loan income tax deduction claims. The Section 24(b) interest deduction guide covers all scenarios in detail, including loss carry-forward rules for rented properties. 

How Co-Borrowers Can Claim Individual Deductions 

Joint borrowers who are also co-owners can each claim deductions: 

Requirements: 

Sharing Principal and Interest in Proportion to Ownership 

If ownership is 60:40 between spouses: 

Principal follows similar proportional allocation within individual 80C limits. 

Document Requirements for Each Borrower 

Each co-borrower needs: 

Lenders provide joint certificates; request individual breakdowns if needed. 

Interest Certificate from Lender 

The interest certificate shows: 

This is the primary document for tax claims. Verify figures match loan statements. 

Property Ownership and Possession Proof 

Keep copies of: 

These establish ownership and possession date, determining when deductions become claimable. 

Stamp Duty and Registration Payment Receipts 

Retain original receipts showing: 

Claim these under 80C in the payment year only. 

Old vs New Tax Regime Differences 

Old regime: All home loan deductions available 

New regime: Limited benefits 

Home loan borrowers typically benefit more from the old regime due to substantial deductions. 

Choosing Regime to Maximise Benefits 

Calculate tax liability under both regimes before deciding. Use the Finnable income tax calculator alongside the EMI calculator for complete financial planning. Salaried employees can switch regimes annually. 

Organising Documents and Certificates 

Create a folder containing: 

Calculating Deductions Based on Property Type 

Self-occupied single property: 

Multiple properties (one self-occupied): 

Using Form 16 and Proofs to Support Claims 

Cross-reference Form 16 deductions with actual payments. Discrepancies require correction. Maintain proofs for 6 years (assessment period). Check your credit score on Finnable periodically to ensure that timely EMI payments are positively reflecting on your credit profile, which supports future borrowing capacity.