How to Claim Home Loan Interest in ITR: A Step-by-Step Guide

Learn how to claim home loan interest in ITR (Income Tax Returns) with this comprehensive step-by-step guide.
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2 min
28 May 2024

Navigating the complexities of Income Tax Returns (ITR) becomes significantly easier when you know how to claim home loan interest in ITR. This guide is designed to provide you with a clear, step-by-step approach to reduce your taxable income through these deductions, potentially saving you a substantial amount of money while ensuring full compliance with tax regulations.

Step-by-step guide to claim home loan interest in ITR

Step 1: Gather necessary documents

  1. Ownership proof: Ensure you own the property or understand your share if co-owned, as deductions are based on ownership share.
  2. Loan details: The home loan must be in your name, or you must be a co-borrower.
  3. Completion certificate: Deductions for interest start from the year the property construction is completed or purchased.
  4. Bank certificate: Obtain a certificate showing your principal and interest payment details.
  5. Municipal taxes: Keep records of paid municipal taxes, which are deductible only if paid within the year.

Step 2: Document submission

  • Employed individuals: Inform your employer to adjust your TDS, avoiding end-of-year tax surprises.
  • Freelancers/self-employed: Retain documents to calculate quarterly advance tax. No need to submit these to the Income Tax Department.

Step 3: Calculate income from house property

  • Calculate the gross value of the property (rental value for rented properties and nil for self-occupied).
  • Deduct paid municipal taxes and apply a standard deduction of 30% of the net annual value.
  • Deduct interest on the home loan to arrive at the income from the house property.

Step 4: Claim deductions

  • Interest deduction: File your claims for home loan interest deductions.
  • Principal repayment: If applicable, claim this under Section 80C, noting that the total deduction cap is Rs 1,50,000 under the old tax regime.

These streamlined steps ensure you effectively manage and claim your home loan deductions.

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Frequently asked questions

What is the maximum limit for home loan interest deduction in ITR?

The maximum limit for home loan interest deduction in the Income Tax Return (ITR) is Rs. 2 lakh per annum for self-occupied properties under Section 24(b) of the Income Tax Act, 1961. For properties that are not self-occupied, there is no maximum limit for interest deduction.

Can I claim home loan interest for an under-construction property?

Yes, you can claim home loan interest for an under-construction property, but the deduction is available only after the construction is complete and you have possession of the property. Until then, you can accumulate the interest paid during the construction period and claim it in five equal instalments starting from the financial year in which the construction is completed.

What documents are needed to claim home loan interest in ITR?

o claim home loan interest in your Income Tax Return (ITR), you will need the following documents:

  1. Home loan statement from the lender showing interest paid during the financial year.
  2. Completion certificate or occupancy certificate (if applicable).
  3. Sale deed or registration document.
  4. Possession certificate or agreement for sale (for under-construction properties).
  5. Loan agreement with the bank or financial institution.
How to claim home loan interest if I have multiple properties?
If you have multiple properties, you can claim home loan interest deduction for each property separately. For self-occupied properties, the maximum limit of Rs. 2 lakh per annum applies collectively for all properties. For properties that are not self-occupied, there is no maximum limit for interest deduction, but you can claim interest paid on each property separately in your Income Tax Return (ITR).
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