Introduction
Upgrading your home—whether extending a room, repairing a roof, or installing waterproofing—can be rewarding but costly. Did you know you can ease the burden with renovation tax benefits? In India, the government allows deductions on interest paid for home improvement loan under Section 24(b) and principal repayments under Section 80C. This comprehensive guide explains how renovation tax India rules work, what qualifies, how to claim deductions, and how to maximise your savings—backed by real-life examples and trusted vendors.
1. Understanding Renovation Tax India Benefits
- Section 24(b):
- Interest on loans for renovating a self-occupied home is deductible up to ₹2 lakh per year, including interest on home loans and home improvement loans.
- Interest on loans for rented properties is fully deductible—no upper limit .
- Interest on loans for renovating a self-occupied home is deductible up to ₹2 lakh per year, including interest on home loans and home improvement loans.
- Section 80C:
- Principal repayments (only) on renovation loans are eligible under the ₹1.5 lakh cap (combined with PF, ELSS, etc.) .
- Principal repayment on a home loan already claimed will reduce the available amount for renovation principal.
- Principal repayments (only) on renovation loans are eligible under the ₹1.5 lakh cap (combined with PF, ELSS, etc.) .
- Combined Ceiling:
- Interest deductions under Section 24(b) are capped at ₹2 lakh, covering both home and home improvement loans.
- Within that ₹2 lakh, you can include ₹30,000 from renovation interest if home loan interest claimed is ₹1.7 lakh .
- Interest deductions under Section 24(b) are capped at ₹2 lakh, covering both home and home improvement loans.
2. What Counts as Home Improvement
Qualifying works include:
- Structural changes like room additions and balcony extensions
- Roof and plumbing repairs, retile bathrooms or kitchen
- Waterproofing or repairing ceilings and floors
- Painting and external façade work
- These must involve construction work; buying appliances or furniture alone doesn’t qualify.
Non-qualifying items: furniture, curtains, gadgets, landscaping.
3. Loan Options & Eligibility
- Home Improvement Loans / Top-Up Loans: Bank- and HFC-financed loans specifically structured for renovation (80–90% of renovation cost). Banks check credit scores, income, and renovation plans before disbursal.
- Key Eligibility Checks: Your existing home loan shouldn’t be in default; the property must be self-occupied.
Banks/institutions include: SBI, HDFC, Bajaj Housing Finance, Tata Capital.
4. How to Apply & Claim Deductions
Step-by-step Process
- Plan and Estimate Costs: Get quotations for structural and repair works.
- Apply for Loan: Submit identity, income proof, property documents, and quotes.
- Disbursement: Lump sum or staged payout as works complete.
- Documentation: Keep invoices, contractor bills, loan interest certificates, and proof of payment.
- File for Deductions:
- Salary earners submit interest certificate to employer.
- Self-employed include details in ITR under Section 24(b) and 80C.
- Salary earners submit interest certificate to employer.
- Maintain Records: Keep lenders’ certificates, invoices, and loan documents in case of an audit.
5. Real-Life Examples
- The Mehta Family (Mumbai):
- Took a ₹10 lakh renovation loan at 8.5% for roof waterproofing and kitchen refurbish.
- Interest paid: ~₹85,000; principal ₹60,000.
- Claimed ₹85,000 under Section 24(b) and ₹60,000 under 80C—total savings of ~₹40,000 in taxes.
- Took a ₹10 lakh renovation loan at 8.5% for roof waterproofing and kitchen refurbish.
- The Sen Couple (Bengaluru):
- Took a ₹20 lakh home improvement top‑up for an extra room.
- Interest ₹1.2 lakh + original home loan ₹1.3 lakh = ₹2.5 lakh (capped at ₹2 lakh).
- Principal ₹1 lakh under 80C.
- Took a ₹20 lakh home improvement top‑up for an extra room.
6. Tips to Maximize Your Benefits
- Limit total interest to ₹2 lakh and claim renovation interest upto ₹30,000.
- Keep accurate documentation—essential for audit protection.
- Sync loan disbursements with renovation phases to match interest records.
- Consult a Chartered Accountant for precise calculations and optimizing Section 80C use.
7. Trusted Lenders & Vendors
| Vendor Type | Names & Services |
| Home Improvement Loans | SBI, HDFC Bank, Bajaj Housing Finance, Tata Capital |
| Contractors & Builders | Urban Company (plumbing & painting), Livspace (kitchen & modular interiors) |
| Waterproofing Specialists | Dr. Fixit applicators, Pidilite waterproofing experts |
| Tax & Legal Advisors | M/s A. Pais & Co. (Mumbai), M/s Rao & Co. (Bengaluru) |
8. Common Mistakes to Avoid
- Including furniture or appliances in renovation loan—loses tax eligibility.
- Skipping documentation like receipts or payment proofs.
- Claiming full loan under Section 24(b)—remember limit is ₹2 lakh interest combined.
- Not coordinating with tax advisor for Section 80C interplay.
Conclusion
Renovating your home is more than aesthetics—it’s an investment in safety, comfort, and property value. Thanks to renovation tax India rules, you can claim deductions on both interest (up to ₹2 lakh) and principal under Section 80C. With proper planning, documentation, and guidance from trusted lenders and contractors, your home makeover can be rewarding and cost-effective. Don’t miss out on home improvement deduction opportunities—maximize your tax savings while creating your dream space.
Source : fulinspace.com