Buying a home is a major milestone, but it comes with financial commitments. While the interest on your home loan offers tax benefits, What about the principal repayment?

Section 80C of the Income Tax Act comes to the rescue!

• Reduce Taxable Income with Principal Deduction: A portion of the principal amount you repay annually on your home loan qualifies for deduction under Section 80C. This effectively lowers your taxable income, leading to tax savings.
• Combined Limit with Other Investments: There's a maximum deduction limit of ₹1.5 lakh under Section 80C. This includes your home loan principal repayment along with other investments like PPF, NSC, and insurance premiums.

Conditions to Remember: There are some key points to keep in mind:

• The deduction applies only to completed properties and loans from approved lenders like banks, housing finance companies, or your employer.
• The house property should not be sold within five years from the end of the financial year in which possession of such property is obtained. This benefit is for new home purchases and construction, not renovations.

Additional Points:

• The principal repayment is eligible for deduction only if it is in respect of loans taken for the purchase or construction of a new house. It does not apply to loans taken for repairs or renovation​​​​.
• The stamp duty, registration fees, and other expenses directly related to the transfer of the property are also eligible for deduction under Section 80C.
• If the loan is taken in joint account, deductions can be claimed proportionately in the ratio of repayment.

By understanding Section 80C effectively, you can significantly reduce your tax burden on your home loan principal repayment. Remember to keep all relevant documents like loan certificates and repayment schedules for filing your tax returns. Consulting a tax advisor for personalized guidance is always recommended.