Home Loan Principal Deduction

Home Loan Principal Deduction – The home loan principal deduction refers to the tax benefit available on the principal repayment of a home loan taken to purchase, construct, or renovate a residential property. Under Section 80C of the Income Tax Act, taxpayers can claim a deduction for the amount of principal repaid during a Financial Year (FY), subject to the overall limits of Section 80C. The Assessment Year (AY) is the year in which income earned during the preceding Financial Year (FY) is evaluated and taxed. Deductions for principal repayment are claimed in the corresponding AY while filing income tax returns.

Example: If a taxpayer repays ₹1.5 lakh of principal on a home loan during FY 2022–23 (1 April 2022 – 31 March 2023), they can claim this deduction in AY 2023–24