ITR Filing FY25: Are Taxpayers Taking Full Advantage of Loan-Related Tax Deductions?

As the income tax filing season has begun in India, many individuals may be unknowingly ignoring substantial deductions available on loans. From home loan interest and principal repayments to electric vehicle (EV) loans, several provisions under the Income Tax Act, 1961, can result in effective tax savings if properly claimed.

ITR Filing FY25: Claim Home Loan Interest Deduction via Section 24(b)

One of the most popular tax benefits available to homeowners is under Section 24(b). It provides significant deductions from income generated through house property, particularly for interest paid on home loans.

• For self-occupied residential properties, taxpayers can claim a deduction of up to ₹2 lakh on loan interest annually.
• For let-out (rented) properties, while there’s no upper cap on interest deduction, only ₹2 lakh can be set off against income in a given financial year. The remaining amount is carried forward.
• The benefit is limited to the interest portion and does not include the principal amount.

To avail this deduction, individuals must possess a valid interest certificate issued by their lender and ensure the property is either occupied or deemed occupied.

Section 80C: Deduction on Home Loan Principal

Section 80C of the Income Tax Act allows a further deduction of up to ₹1.5 lakh on the principal component of a home loan EMI.

• This deduction also covers stamp duty and registration fees, provided the payment is made in the same year the deduction is claimed.
• Applicable only if the property is completed and possession has been received.
• Applicable solely under the old tax regime.

Neha, a school teacher in Jaipur, took a home loan in 2019 and received possession of her flat in 2022. During FY 2023–24, she paid ₹1.8 lakh towards the principal component of her EMI. Since she opted for the old tax regime, she claimed a deduction of ₹1.5 lakh under Section 80C. 

The conditions surrounding this section are strict, including mandatory lock-in periods and exclusion of renovation or reconstruction loans from eligibility.

Read More: ITR Filing 2025: Here’s Why You Must Declare F&O Losses!

Section 80EE: Extra Deduction for First-Time Homebuyers

To further enhance affordability for new property seekers, the government introduced Section 80EE.

• Offers an additional deduction of ₹50,000 annually on interest payments.
• Only for loans sanctioned between April 1, 2016 and March 31, 2017.
• The property value must not exceed ₹50 lakh, and the loan size should not exceed ₹35 lakh.

This benefit is available over and above the limits under Section 24(b), creating additional tax savings opportunities for eligible first-time buyers.

Section 80EEA: Boost for Affordable Housing Buyers

Section 80EEA extends additional tax breaks for homebuyers purchasing properties under the affordable housing segment.

• Deduction of up to ₹1.5 lakh on interest paid.
• Applies to loans taken between April 1, 2019 and March 31, 2022.
• The stamp duty value of the house must not exceed ₹45 lakh.
• Not available if Section 80EE has already been claimed.

This section was initiated under the ‘Housing for All’ mission and continues to benefit thousands, including non-resident Indians (NRIs), aspiring to own modest dwellings.

Section 80EEB: Tax Benefits for Electric Vehicle Loans

In another green initiative, the government introduced Section 80EEB, paving the way for deductions on EV loan interest.

• Taxpayers can claim up to ₹1.5 lakh on interest paid on EV loans.
• Only loans sanctioned between April 1, 2019 and March 31, 2023, qualify.
• Applies to both 2-wheelers and 3-wheelers. 

Ravi, a food delivery partner in Hyderabad, bought an electric scooter worth ₹1.2 lakh in August 2021 by taking a loan. Since the loan was sanctioned between April 1, 2019, and March 31, 2023, he claimed a deduction of ₹12,000 on the interest he paid during the year under Section 80EEB. This helped reduce his taxable income. 

This section targets making environmentally friendly vehicles more accessible, adding a financial incentive to adopt sustainable choices.

Loan Disclosure in Income Tax Returns

Taxpayers must ensure accurate reporting of loans and related interest in their Income Tax Return (ITR). The ITR forms specifically request information under:

• Section 24(b)
• Section 80C
• Section 80EE
• Section 80EEA
• Section 80EEB

Correct disclosure is essential not only for claiming deductions but also for avoiding mismatches and subsequent scrutiny by the tax department.

HRA and Home Loan: Can You Claim Both?

In certain situations, taxpayers can simultaneously claim House Rent Allowance (HRA) and home loan deductions. To do so:

• The individual must reside in a rented house while owning another property in a different location.
• Documentary evidence, like rent receipts and registered tenancy agreements, must be retained.

The dual benefit is permitted under existing tax laws, provided the conditions are met and records substantiated.

Conclusion

While thousands of taxpayers are eligible for substantial deductions on home and EV loans, a significant number may not be claiming their rightful benefits. Understanding and utilising provisions under Sections 24(b), 80C, 80EE, 80EEA, and 80EEB could result in annual tax savings of ₹1.5 lakh to ₹2 lakh or more. Proper documentation, accurate disclosure, and awareness of eligibility timelines are crucial to optimising individual tax positions during the return filing process.

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