Buying own house is one of the most important goals in everyone’s life. Looking at the rising property prices some purchase it as an investment and many wants to avoid the stay on rent and thus wants to have own accommodation. The increase in housing prices have in turn lead to increase in demand of home loan as very few can afford to buy property on cash/lump sum.

Along with the comfort of paying back the loan in installments home loan comes with lot many tax benefits. Many investors who even can afford to pay in lump sum prefer going through home loan route as the tax benefits reduce the net outflow of interest.

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Understanding home loan tax benefits are very important as one can take multiple advantages from this if used rightly. Understanding income tax benefits of an interest payment under section 24, principal payment under Section 80C, benefits under the joint home loan, second housing loan etc. makes this concept more interesting. 
Before going ahead with the details on Income tax benefits on a home loan, let's first understand the basic terms related to the housing loan:
EMI: Equated Monthly Installment (EMI) is the term used for the monthly payments made for repaying a home loan. EMI has 2 constituents – Principal and interest.  The principal is the portion of loan capital amount and interest is what bank charges for that loan. In the early years of repayment, EMI consist of higher interest portion and lesser principal amount. But as time passes your principal payment increases and interest reduces.
Self-occupied house:  As per Section 23(2) (a), a house property shall be termed as self-occupied property where such property or part thereof: (a) is in occupation of owner for the purpose of self-residence, (b) is not actually let out during the whole or any part of previous year; and (c) no other benefit is derived by the owner.
Deemed to be let out:  If an assessee occupies more than one property, he is allowed to treat only one property as self-occupied at his option. The remaining self-occupied properties shall be treated as “deemed to be let out”.
Joint home loan: A Joint home loan is a loan where there is more than one borrower i.e it is a loan taken jointly by more than one person. A joint home loan can only be availed by a minimum of two and maximum of six applicants. A joint housing loan is given to married couples or close blood relatives like parent and child. Usually, banks insist that all the co-owners of the home must be co-borrowers.
Pre-EMI interest: No EMI payments get started, till the time loan gets fully disbursed. As happens in a home loan with a construction linked plan, no EMI starts till the offer of possession by the builder. The Borrower just has to service the loan interest till then. So the interest amount which has been paid before the starting of EMI called as Pre EMI interest or Pre-construction EMI (which is only the interest part).
The Idea of explaining the above terms is to help you understand the taxation under housing loan in a much better way.

 Home loan Tax benefits u/s 80C

As explained earlier that housing loan EMI consists of Principal and interest. The principal portion of home loan EMI paid in a financial year is eligible for Income tax benefit u/s 80C up to a maximum limit of Rs 1.5 lakh per year. Other Section 80C components for tax saving are PPF, ELSS, Life insurance premiums, NSCs, 5-year bank fixed deposit etc. The total cap of section 80C investment is Rs 1.5 lakh which is inclusive of this principal payment in housing loan.

Home loan tax benefits u/s 24

The interest portion of housing loan EMI paid in a financial year can be claimed as deduction u/s 24 up to a maximum limit of Rs 2 lakh per year. Interest payment is considered as the deduction under the head “income from house property”.
The best part in tax benefit under section 80C and section 24 with respect to housing loan EMI is that there’s no limit on houses and it can be claimed irrespective of the fact the house is self-occupied or let out. Say for example you work in Delhi, but you have one house in Chandigarh and other in Mumbai, for which you are paying housing loan EMIs, You can claim benefit of Section 80C and Section 24 for both of houses under self-occupied category within the maximum limit u/s 80C which is Rs
Say for example you work in Delhi, but you have one house in Chandigarh and other in Mumbai, for which you are paying housing loan EMIs, You can claim benefit of Section 80C and Section 24 for both of houses under self-occupied category within the maximum limit u/s 80C which is Rs  1.5 lakh and u/s 24 which is Rs  2 lakh, combining the total principal and Interest payment of all the houses. Do note that both benefits can be claimed only after taking possession of the house.
Some conditions to avail this benefit:
Maximum interest allowed in aggregate of Rs  2 lakh per year, if the following conditions are satisfied-
a)       The Loan is utilized for construction or acquisition of House on or before 1-4-99.
b)      Construction or acquisition of house should be completed in a maximum of 5 years (w.e.f 1.4.16) starting from the end of financial year in which loan is borrowed.
One more interesting point here is that section 24 tax benefit can be claimed even if the loan is raised from friends, family or relatives. If you have a good inflow of income and then by doing tax planning early in life you can create different tax files in the family and can use them for your own tax benefits. This way you can save on the interest paid to the bank, and also be able to claim tax benefit on your own income.
Do note that this benefit can only be claimed against the certificate issued by the loaner and he has to pay tax on the interest received against this loan. 
 Special tax incentive announced for people taking the first home loan up to Rs 25 lakh in FY 2013-14 (Section 80EE). In this scheme, additional interest deduction of Rs 1 lakh is offered only for one year. If one could not exhaust the full Rs 1 lakh in 2013-14, then he can carry forward the balance to next year. Please note this is over and above the deduction of Rs 1.5 lakh and of course with many additional conditions.
Rules u/s 80EE is being revised every year in Budget. As per the last announcement in budget 2016, Section 80EE allows additional deduction of Rs 50000 per year, over and above Rs 2 lakh u/s 24 on home loan interest portion, provided you satisfy the following conditions:
·         Your Loan should be taken in FY 2016-17
·         Home Loan must be taken from a financial Institution.
·         At the time of sanction of loan, the borrower should not own any other residential property.

·         The Value of property should be Rs 50 lakh or less and the Loan value should be Rs 35 lakh or less.