Income Tax Planning: Home Loan Principal Repayment – Section 80C

• An individual can claim income tax benefits on the principal repayment as well as the interest repayment on a home loan.

• The principal repayment of upto INR 1,00,000 qualifies for deduction from taxable income under Section 80C. The interest repayment of upto INR 1,50,000 qualifies for deduction from taxable income under Section 24(b) for a self occupied property.

• The deduction on the principal component of the home loan can be availed as soon as the borrower starts repaying the home loan.

• The borrower need not wait till the acquisition or completion of the house property.

• The interest repayment deduction under Section 24 can be availed after the completion or acquisition of the house property.

• The interest deduction for pre-acquisition or pre-construction period can be availed after the acquisition or construction is complete. This benefit can be availed in 5 equal instalments (20% each year) in 5 years.

• The house property for which the tax benefit is availed should not be sold before a period of 5 years, else the tax benefit is reversed.

• Money spend on reconstruction, renewal or repair does not qualify for this deduction.

• This deduction is only for residential property and not for commercial property.