Buying a home in Pune gives you more than just a place to call your own-it comes with substantial tax benefits that can reduce your annual tax burden. Real estate investments secure your future and let you take advantage of valuable tax benefits from the Indian government.
The tax incentives make buying a home in Pune a smart financial move. You can claim deductions of up to Rs. 1.5 lakh annually on your home loan principal repayment under Section 80C. The benefits don’t stop there. You can also deduct up to Rs. 2 lakh per year on interest paid for self-occupied properties. Property owners who rent out their homes get an even better deal they have no upper limit on interest deductions, subject to certain conditions.
The benefits are even more attractive for affordable homes. If your property is valued under Rs. 45 lakh, Section 80EEA lets you claim an extra deduction of Rs. 1.5 lakh on home loan interest. Let’s dive deeper into these tax benefits and help you maximise your tax savings while investing in your dream home.
Section 80C: Tax Benefits on Home Loan Principal
Section 80C of the Income Tax Act offers significant tax advantages to Pune homeowners. You can claim substantial deductions on your home loan’s principal repayment, which makes owning property financially rewarding.
Eligibility criteria for claiming 80C
You need to own or co-own the residential property to qualify for Section 80C deductions. The property’s construction must be complete, and you should have possession before claiming this benefit. The deductions apply to both self-occupied and let-out properties.
The property must stay in your possession at least five years after the end of the financial year in which you got it. Any tax benefits you claimed will be added back to your taxable income if you sell it earlier.
These deductions work only with the old tax regime. You can claim this deduction on your income tax returns whether you’re an individual or part of a Hindu Undivided Family (HUF).
Maximum deduction limit and what it covers
Your home loan principal repayment qualifies for a maximum deduction of Rs. 1.5 lakh each financial year under Section 80C. This limit includes other eligible investments like ELSS funds, PPF, and tax-saving fixed deposits.
Co-borrowers who own the property together can each claim deductions up to Rs. 1.5 lakh. The only condition is that they must contribute to the loan repayment. Families buying property together can multiply their tax benefits this way.
Stamp duty and registration charges under 80C
Section 80C benefits extend to stamp duty and registration fees when you buy your Pune home. These costs fall under the same Rs. 1.5 lakh limit.
You can claim these charges only in the financial year you paid them. To cite an instance, see if you pay stamp duty on August 30, 2024, you can claim it only in FY 2024-25.
Residential properties alone qualify for this benefit—commercial properties don’t make the cut. Co-owners of jointly purchased properties can claim these expenses on their tax returns based on their property share. Each co-owner can use their complete Rs. 1.5 lakh limit under Section 80C.
Section 24: Interest Deduction on Home Loans
Tax benefits under Section 24 of the Income Tax Act go beyond principal repayments. Property owners in Pune can claim substantial tax benefits on their home loan interest payments.
Self-occupied vs rented property rules
Tax rules are different for self-occupied and rented properties. The Income Tax Department treats self-occupied homes (where you live) with a nil annual value. This means you won’t pay tax on any notional rental income. You can only claim deductions on interest payments.
Rented properties work differently since they generate taxable rental income. The good news is you can claim all the interest paid on your home loan without any upper limit. You also get a standard deduction of 30% from rental income plus deductions on property taxes paid.
Annual deduction limits explained
The Section 24 interest deduction for self-occupied properties has a yearly cap of Rs. 2 lakh. This limit applies even if you own two self-occupied homes. The Income Tax Act now lets you treat two properties as self-occupied.
The Rs. 2 lakh limit works only under these conditions:
- You took the loan after April 1, 1999
- Property construction finished within 5 years from the end of the financial year when you got the loan
The deduction limit drops to Rs. 30,000 if these conditions aren’t met or if you took the loan for repairs and renovation instead of buying or building.
Impact on overall taxable income
These deductions help lower your taxable income and reduce your tax burden. The interest deduction can create a “loss under house property” that offsets income from other sources up to Rs. 2 lakh in a financial year.
You can carry forward any remaining loss for up to 8 years, but it only works against future income from house property. Buying a home in Pune makes sense not just as a place to live but also as a smart tax-planning move.
Additional Tax Benefits Under Section 80EEA and 54EC
Pune homebuyers can get extra financial benefits through Sections 80EEA and 54EC, beyond their standard tax deductions.
Who qualifies for Section 80EEA
First-time homebuyers can claim an additional Rs. 1.5 lakh deduction on home loan interest under Section 80EEA. The qualification criteria include:
- Your loan sanction date must fall between April 1, 2019, and March 31, 2022
- The property’s stamp duty value should stay under Rs. 45 lakh
- You should not own any other residential property at the time of loan sanction
These benefits add to the deductions under Sections 24 and 80C, which makes affordable housing available to more people.
How to use Section 54EC bonds to save capital gains tax
Section 54EC bonds help you avoid tax on capital gains from selling long-term assets like land or buildings. Here’s how to get this benefit:
Make your investment within six months of the sale date in bonds from NHAI, REC, PFC, or IRFC. You can invest up to Rs. 50 lakh per financial year, and the money stays locked in for five years. The bonds currently give a 5.25% annual interest rate.
Affordable housing criteria and benefits
Metropolitan cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai) have a carpet area limit of 60 square meters (645 sq ft). Other locations allow 90 square meters (968 sq ft). These rules apply to all projects that received approval after September 1, 2019.
Smart Tax Planning Tips for Homebuyers in Pune
Smart tax planning helps you save more money when buying a home in Pune. Let’s look at strategies that go beyond simple deductions.
Taking a joint home loan for double benefits
A joint home loan with your spouse gives you a financial edge. Each co-borrower can claim tax deductions separately up to Rs. 2 lakh for interest under Section 24(b) and Rs. 1.5 lakh for principal repayment under Section 80C. You can save twice as much on taxes compared to applying alone. Both applicants must own the property together and pay the EMIs to be eligible.
Renting out your property for higher deductions
Self-occupied properties have limited deductions. However, renting out your Pune property lets you claim the entire interest paid on your home loan without any upper limit. You also get a standard deduction of 30% on the rental income. This approach is particularly beneficial if you own multiple properties.
Using HRA and home loan benefits together
You can claim both HRA exemptions and home loan deductions at the same time in these situations:
- You own a home but live in a rented place in another city
- Your self-occupied property is under construction
- You’ve rented out your property while living in a rented home elsewhere
Reinvesting capital gains to avoid tax
You can completely avoid capital gains tax after selling a property. Just purchase another residential house within one year before or two years after the sale date, or construct one within three years. Haven’t found the right property by tax filing time? You can deposit the amount in the Capital Gains Deposit Account Scheme at any public sector bank.
Conclusion
Buying a property in Pune gives you more than just a home – it comes with major financial perks. Tax advantages make homeownership a smart financial move, not just an emotional one. You can claim deductions up to Rs. 1.5 lakh on principal repayments under Section 80C, while Section 24 lets you deduct up to Rs. 2 lakh on interest payments for self-occupied properties.
First-time buyers should definitely use Section 80EEA to get extra deductions of Rs. 1.5 lakh if they qualify. You can double your tax benefits through joint home loans, which makes family investments an attractive option.
Your choice between keeping the property for yourself or renting it out needs careful thought since tax rules differ for each. Many investors find unlimited interest deductions on rented properties valuable.
Note that these benefits mostly apply to the old tax regime, so you need to assess your complete financial picture before deciding. While tax benefits matter, they shouldn’t be your main reason to buy a home. A home is a big deal as it means that you’re making both a major financial commitment and a life-changing decision.
These tax incentives show the government’s push to encourage property ownership and real estate investment. Using these tax provisions helps you reduce your tax burden while building equity in one of life’s most valuable assets. Whether you’re buying your first home or expanding your portfolio, knowing these tax benefits helps you get better returns on your Pune real estate investment.
References
[1] – bajaj Finserv
[2] – HDFC
[3] – Clear Tax
[4] – Income Tax India
[5] – ICICI Bank
[6] – Aditya Birla Capital
[7] – PFC India
